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The prime minister of Norway has signaled that her government is happy having a weak currency, which she says is supporting the country’s export industry.
Erna Solberg, who leads a center-right government in western Europe’s biggest oil producer, said Norway’s competitiveness in global trade has been “greatly improved” by the krone’s steady decline over time.
“There’s lower growth in a lot of other countries at the moment,” Solberg said in an interview in Oslo on Friday. “The krone is also developing rather weakly, which benefits everyone except those that are traveling abroad.”
The krone rallied at the beginning of the week thanks to a surge in the price of oil, which boosted demand for the currencies of crude-producing nations. But in recent years, it has been hammered as investors have responded to global risks by avoiding peripheral currencies and favoring the dollar.
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Trading in the global foreign-exchange market has jumped to the highest-ever level at $6.6 trillion, according to the Bank for International Settlements. The average daily trading in April was up 29% from $5.1 trillion in the same month in 2016, the BIS reported Monday in a triennial survey on the industry. The growth of FX derivatives trading, primarily swaps, outpaced the spot market and now accounts for almost half of global FX turnover. But in Norway, trading declined by 25%.
The krone has remained weak despite interest-rate hikes by the central bank as Norway’s economy expands faster than much of the rest of Europe, keeping inflation close to the target.
“There’s much that indicates we will be able to maintain good competitiveness,” Solberg said.
The weak currency is giving Norway’s central bank more scope to raise rates, with the next meeting of policy makers set to take place on Thursday. Economists expect the bank to raise the rate to 1.5% by the end of this year, marking a fourth hike in just over 12 months.
The prime minister’s comments come as she prepares to present next year’s budget on Oct. 7. Her government has dialed-up spending of the nation’s oil wealth to about 8% of the economy, or $26.5 billion this year, to fill a budget shortfall amid tax cuts and big jump in spending on infrastructure.
She declined to comment on budget specifics, adding that any new spending plan will be well-adapted to the economic situation.
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