Over the past month, we have been wrong on the NOK as oil prices and Norwegian macro data have softened more than we had anticipated. Hence, we are reviewing our NOK outlook and strategy.
Downside risks to oil prices and Norwegian growth will weigh on the NOK near term. Medium term, we still believe that the market is too bearish on Norwegian growth. In addition, we forecast that Norges Bank will remain on hold until it begins to raise rates in early 2016.
Over the coming three months, we expect EUR/NOK to be choppy and volatile in broad ranges of 8.30-8.65. From Q1 15, we expect NOK to appreciate against trading-partner currencies supported by growth, carry and stabilising oil prices.
Norwegian asset managers should lower short-term FX hedge ratios versus the USD. Norwegian exporters should maintain neutral FX hedge ratios versus EUR and SEK receivables - lower them against USD.
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