The Norwegian Krone is in free circulation since its fixed exchange rate was lifted in 1992 due to the inability of the Norwegian Central Bank to control excessive speculation.
As with all currencies, economic trends cause the price of the Norwegian crown to fluctuate. Traders can trade the Norwegian Krone when the value of the Euro (EUR) is in doubt. Increased activity in NOK trading may increase the exchange rate. Changes in world crude oil prices also affect the value of NOK, as Norway is a leading oil exporter in Western Europe.
One can find a systematic trend of the dependence of the Krona exchange rate in the long term on the difference in oil prices between Norway and other countries. Higher prices in Norway result in a weaker crown in the long run. The steady rise in the amount of oil leads to an increase in the amount of the crown. In the short term, one can see that the exchange rate of the Krona is changing due to international financial turbulence, differences in interest rates, and oil prices. Since the difference in interest rates is an endogenous variable for Norway, the relationship between the Krona exchange rate and the difference in interest rates cannot be interpreted as a causal relationship.
It seems that there is an apparent trend-the rate of the crown will be more dependent on
developments in international financial markets since 1997. The results show that volatility in global currency markets provides movement in the exchange rate of the crown from month to month as the price of oil. One reason for this may be the awareness on the part of international operators that the Krona is a subject for speculation.
Shipping, hydropower, fishing, and production in Norway contribute to the country’s gross domestic product (GDP). However, it is interesting to note that many industries are state-owned. Historically, the Krona is a smart investment, as Norway is betting on one of Europe’s most stable economies. The current exchange rate of the crown against the currencies of trading partners is significantly weaker than the price of equilibrium.
The most important political and monetary institution in Japan is the Ministry of Finance. Its impact on currency management is more significant than that of the US, UK, or German ministries of Finance, despite gradual measures to decentralize decision-making. Finance Ministry officials often make statements about the economy that have a noticeable impact on the yen. These statements include a verbal intervention to avoid an unwanted appreciation/depreciation of the yen.
In 1998, Japan passed laws ensuring the independence of its Central Bank (BoJ) from the government (MoF). Full control of monetary policy has moved to the Bank of Japan, while the Ministry of Finance is still responsible for monetary policy.
The most important economic data in Japan are GDP, Tankan survey (quarterly survey of business sentiment and expectations), international trade, unemployment, industrial production, and money supply (CD M2 +).
Nikkei-225: Japan’s leading stock index. A cognitive decline in the yen usually raises shares of export-oriented companies, which tends to increase the overall stock index. The relationship between the Nikkei and the yen is sometimes reversed when a robust open market in the Nikkei tends to raise the yen (has an impact on USD/JPY) as investors ‘ funds are invested in yen-denominated stocks.
Japan imports 1.2% of Norway’s total exports, while Norway imports 6.9% of Japan’s total exports. Norway’s most significant exports are mineral fuels, oils, ore slag, and ash, while Japan’s most significant exports are vehicles other than rail or tramway.
The Bank of Japan buys 10-and 20-year JGB each month to inject liquidity into the monetary system. Benchmark 10-year JGBs yields are a crucial indicator of long-term interest rates. The spread or difference between 10-year JGB yield and 10-year US Treasury bond yield is an essential driving force behind USD/JPY exchange rates. Falling JGB (JGB yield growth) usually increases the yen and affects the price of different currency pairs.
The NOK/JPY currency pair is very responsive to various major political and economic events in the world. For this reason, the predictability of its price chart is poor. So this is a fairly typical case where the NOK/JPY price goes in the opposite direction to the analysis.
Beginners are not recommended to start trading currency with this pair, because successful NOK/JPY traders need to understand many subtleties and peculiarities of the price curve behavior, which at first glance does not matter, but can significantly affect the future exchange of the pair.
This trading instrument is considered illiquid compared to major currencies such as EUR/USD, USD/CHF, GBP/USD, and USD/JPY. Therefore, when you predict the future trend of a currency pair, you need to pay attention to the main currency pairs, which include the US dollar.
If you want to trade cross currency pairs, you must remember that brokers spread are often higher for cross rates than for major currencies. Thus, you should read and understand the trading conditions offered by the broker before you start cross-rate trading.