Norwegian Krone Faces Volatility Despite Long-term Strengthening Prospects: Handelsbanken Report
OSLO – The Norwegian krone is susceptible to critically important fluctuations despite expectations of gradual strengthening, according to a new report from Handelsbanken. The bank attributes recent weakness to Norges Bank’s unexpected interest rate cut in June, declining oil prices, and broader market instability.
Handelsbanken analysts acknowledge the krone experienced a rally in the spring of 2025 following a weaker winter, but summer trends indicate ongoing challenges. norges Bank’s policy decisions could continue to introduce a sustained ”risk premium” – an additional return investors demand for riskier assets – keeping the krone weaker than fundamental conditions suggest.
However, the report forecasts a long-term strengthening trend driven by expectations of a weaker US dollar and a positive outlook for the European economy.increased public investment in defense, energy, and infrastructure across Europe is expected to bolster demand for Norwegian goods and services.
Despite the optimistic outlook, Handelsbanken cautions that periods of lower oil prices or increased “Global Risk Aviation” – a state of heightened investor caution due to global economic uncertainty – could trigger a substantial weakening of the krone.
