Thursday’s interest rate hike strengthened the Norwegian krone. This does not necessarily mean that Norwegians who love to travel should leave the country for a holiday, as we should believe the experts.
- Thursday’s interest rate hike boosted the value of the Norwegian krone, but that doesn’t necessarily mean cheaper holidays for Norwegians.
- Nils Christian Knudsen, an interest rate and currency strategist, believes the US could be a great destination at the moment, but chief economist Jan Ludwig Andreasen recommends Turkey.
- The krone may continue to strengthen over the next year, but unexpected events may affect the currency market.
After Thursday Some unexpected rises in interest ratesThe krone immediately strengthened by about 10 cents against both the euro and the dollar.
Norwegians received regular currency minted abroad throughout the summer. Suddenly, the euro was to be multiplied by twelve, not eight.
The central bank assumes that the krone exchange rate will strengthen “to some extent in the future.”
Below you can explore the evolution of how many kroner you get for 1 euro and 1 dollar:
This doesn’t have to be good news for holiday-loving Norwegians, who crave something other than the cold, dark winters in Norway.
– The starting point has improved, but there are several things you should be aware of before traveling abroad. Although the krone has strengthened slightly, other factors such as inflation play an important role, interest rate and currency strategist at Handelsbanken, Nils Christian Knudsen, tells VG.
Therefore, the future looks a little better, in light of the interest rate hike by the Norwegian Central Bank.
“On Thursday, the krone appreciated a little more than 2 percent, and then we will be left with a bit of a clean slate,” says Knudsen.
The strategist confirms that traveling abroad is still expensive.
Cheaper travel to the USA
For Norwegians who receive currency news from the central bank with a smile, it may be more worthwhile to go on holiday now than if you wait too long.
– Right now, the dollar has weakened, meaning that traveling to the United States has suddenly become cheaper, Knudsen says.
Many central banks around the world have been waiting to raise interest rates and also have different inflation than we have in Norway.
This could affect travel-loving Norwegians:
The dollar has seen a relatively large movement in a short time, and inflation appears to be declining in the United States. So my travel advice for Norwegians now is to go to the USA, which is where you should go, since you can afford it of course, says Knudsen.
Meanwhile, interest rate and currency analysts state that the dollar is strong in a historical context, while the krone is historically weak.
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The bank, which has 16,000 loan customers, is taking matters into its own hands and lowering its interest rate hike on Thursday.
Chief Economist: Look east
However, ICA’s chief economist, Jan Ludwig Andreessen, disagrees with Knudsen’s advice on the US.
– I think the dollar is still expensive and there is high inflation in hotel accommodation in New York, for example. The dollar is expected to fall, so there is hope that it may be better to go to the US next year.
-So you think you shouldn’t go there now?
– In this case, you have to have very good advice, answers Andreessen.
He prefers to look east if the desire to travel is unbearable for the Norwegians:
– The most important travel advice now is Türkiye. Other typical countries that Norwegians like to visit, such as Italy and Spain, have become more expensive. Despite the strengthening of the krone exchange rate, inflation remains high in tourism there.
– A better starting point for a stronger corona
If inflation declines, you should still prepare for news blowing in the wrong direction as well.
Knudsen at Handelsbanken encourages caution when thinking and talking about the currency market.
– I think we have a better starting point for a stronger krone in the future, but unexpected events that occur can quickly change the picture. That’s why you have to plan for the exchange rate to fluctuate a lot.
At some point, the value of the krone will rise, also believes Andreessen, who thinks it was a bit strange that Norwegians were not affected by the rise in the krone exchange rate.
The krone has been disappointingly weak for a long time, contrary to my expectations, but I have been wrong before. I think the krone will continue to strengthen in 2024 as well, says chief economist.
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