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DNB See NOK / Oil Correlation Re-Establishing Itself in 2023

NORWAY
  • Of note considering today's volatility in Scandi currencies - DNB write that they do not see the signs of a disconnect between NOK valuation and oil&gas prices, and expect the correlation to return to historical norms this year.
  • They write that the disconnect in 2022 was due to breakdown in relative pricing between gas and oil (with gas making up close to 50% of Norway's petroleum export volume) and a misalignment in the petroleum fund mechanism for currencies I.e. Net NOK purchases were misaligned with fiscal needs due to the lag between MoF updates and the fluctuation in daily energy prices.
  • These flows should net to zero over time, helping the NOK / oil correlation re-settle this year, with a MoF review of the government's liquidity management to further smooth the impact of petroleum-related NOK transactions.

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