Norwegian Krone Strengthens Against Euro on Hawkish Policy and Oil Prices

Rabobank's Senior FX Strategist Jane Foley expects the Norwegian Krone (NOK) to continue its upward momentum against the Euro (EUR). The NOK has been the strongest G10 currency across multiple horizons, driven by high oil prices, above-target inflation, and a hawkish monetary policy from Norges Bank. Norway's role as Europe's largest energy exporter also contributes to the currency's strength.

Foley believes that EUR/NOK will drift lower, with a 12-month target near 10.50. The strategist has cut her 3-month target to 10.80, citing speculation about an Iran war and potential rate hikes by Norges Bank. Market rates currently imply little risk of a rate hike next month, but this may change after the release of August CPI inflation data on September 10.

Norges Bank's policy and Norway's energy exports are key factors supporting the NOK's strength. The currency has outperformed other G10 currencies across various timeframes, including the past month and five trading sessions. Expectations of further policy actions from Norges Bank also contribute to the NOK's appeal.