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NOK’d over unfairly by oil – HSBC

FXStreet (Barcelona) - The HSBC Bank Global Research Team sees recent NOK weakness as being associated with the lower oil price, but comments that it is not the sole driver for the currency.

Key Quotes

“The decline in oil prices since July has seen the NOK fall 11% against the USD – an unjustifiably large fall in our view.”

“Whenever there is a movement in the oil price, the market looks to oil-producing economies; however, most of their currencies are pegged to the USD. The markets therefore look towards the free-floating currencies such as the BRL, RUB and NOK. Both the BRL and RUB have had other drivers to the currency, with the elections in Brazil and the continued geopolitical situation in Russia. As a result, NOK has been the currency of choice and has sold off, but there has been an overreaction.”

“Instead, the depreciation of the NOK is likely driven by the marked retreat in Norwegian rate expectations, which strike us as exaggerated given the robust signals on growth and inflation. Oil is important to Norway, but it is not the sole driver of the NOK.”

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