Rate Cut Sends Norwegian Krone Lower

The Norwegian krone is lower on the Forex market today, thanks in large part to a rate cut. Norges Bank cut interest rates for the first time since 2009, and the move is an indication that the economic situation in Norway may not be very strong.

Norges cut the interest rate from 2.25 percent to 1.75 percent, a reasonably hefty rate reduction in response to the growing concerns about Europe. Norway had been seeing rate increases regularly since 2009, but the recent troubles have Norway scrambling to prepare for the worst.
Indeed, with Italian borrowing costs soaring, and eurozone leaders still unable to come to an agreement on a solution to the debt crisis — even with tough new rules — European countries are bracing for more trouble. Indeed, even though tough new budget rules could help the European situation in the long-term, they do little to stem the current tide of trouble.
The Norges Bank rate cut is resulting in NOK losses against the majors, with even the euro gaining against the Norwegian currency. It will be interesting to see what happens next, with so much volatility and uncertainty in world financial markets right now.
At 16:43 GMT EUR/NOK is higher at 7.7611, up from the open at 7.7393. USD/NOK is also higher, at 5.9815, up from the open at 5.9858.

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