Krone Is World Beater With Norway Oil, Rates, Surplus

Foreign-exchange traders searching for refuge from mounting losses in the credit market are heading to Norway.

The krone is luring speculators attracted to the highest interest rates in five years and a trade surplus that is bigger than any of the 30 most-developed economies thanks to oil prices that now exceed $100 a barrel. Since the start of the collapse of the U.S. subprime-mortgage market in June, the krone’s 15.5 percent gain has trailed only the Japanese yen and Swiss franc among the world’s 16 most-actively traded currencies.
Norway’s currency is trading at its strongest level in a generation. John Taylor, who invests $12 billion of currencies at FX Concepts Inc. in New York, is betting the rally is far from over. Citigroup Inc., the third-biggest currency trader, says it will gain 8 percent against the euro, 6 percent versus the dollar and 12 percent against the yen this year, the best overall performance of the 19 currencies tracked by the bank.

“We’re looking to buy the krone,” Taylor said. “We’re holding as much as we’ve ever owned. It just looks good against so many currencies: the euro, the yen, the Canadian dollar.”

Hedge funds and private clients trading through UBS AG, the second-biggest currency trader, bought more krone than they sold against both the dollar and euro in four of the last five months, according to Alina Anishchanka, an analyst at the Zurich-based bank. Private clients doubled their krone buying last month.

Norway’s currency ended last week at 5.2131 to the dollar, and reached 5.1615, the highest in 27 years. It was at 7.9175 per euro by 8:45 a.m. in London today. The krone gained 4 percent versus the dollar and the British pound this year and 0.2 percent against the euro.

A country the size of Japan with a population about 25 times smaller at 4.7 million, Norway is the fifth-biggest oil exporter, after Saudi Arabia, Russia, Iran and Nigeria, according to the Paris-based International Energy Agency.

Bloomberg