UBS stated that the decline of the euro/Norwegian krone pair to 10.44 turned out to be excessive. The bank kept its target levels for the coming quarters.
UBS stated that the recent strengthening of the Norwegian krone against the euro exceeded expectations. The EUR/NOK pair fell to around the 10.44 mark, which is below the bank's target level of 10.70.
The Norwegian central bank left the key rate unchanged at 4.50% at its November meeting. This decision supports the krone's yield advantage amid high domestic inflation. The regulator stressed that inflation remains too high and rates are likely to stay elevated for some time.
The krone strengthened in October despite falling oil prices and the market's muted reaction to the Norges Bank decision. UBS strategists Clemence Dumoncel and Konstantin Bolts noted that a corrective rebound to the 10.80 level would not disrupt the overall trend in favor of the Norwegian currency and could serve as a convenient point for building positions.
The bank kept its forecasts at 10.70, 10.60, 10.50 and 10.50 for the end of each quarter through September 2027. UBS named the 10.20 mark as the next downside threshold. At the same time, a rebound to 10.80 is viewed as an opportunity to rebuild long positions in the krone.
Oil prices have been falling since September, depriving the krone of some support. Norges Bank noted rising electricity prices and persistent inflationary pressure: core inflation stood at 3.0% in September. The central bank acknowledged that the krone's exchange rate is currently higher than assumed in previous forecasts.