The Norwegian krone is finding some modest support this morning, following a general rebound in high-beta currencies. In the view of economists at ING, the illiquid NOK may struggle to recover just yet, but the EUR/NOK is set to return to the 9.50/70 zone in the second half of 2022.

Liquidity is an issue

“We think Norges Bank will bring interest rates to 1.50% by year-end, with risks skewed towards an even faster pace of tightening. The domestic backdrop is therefore set to remain quite supportive for NOK, and so should the commodity picture – especially if the EU implements the Russian oil ban.”

“NOK is the least liquid currency in the G10, which makes it exceptionally vulnerable and volatile during periods of risk sentiment turbulence. Until risk assets find some peace, despite monetary tightening and global slowdown concerns, NOK will struggle to recover.”

“Once the dust settles, NOK’s set of attractive fundamentals should fuel a gradual return to the 9.50-9.70 area – which we expect to materialise in the second half of the year.”