OSLO (Reuters) - Norway’s central bank said on Thursday it is considering entering the market to buy its own crown currency, triggering a rebound in the crown, which had lost a third of its value this year, in a step it has not taken since early 1999.
Norges Bank will also pump more cash into the banking system, offering loans lasting for up to 12 months to help alleviate effects of the coronavirus pandemic and a slide in the price of crude oil, Norway’s biggest export.
The crown rallied following the statements, erasing intra-day losses against the euro, although Norges Bank declined to say whether any currency intervention had taken place.
Danske Bank Chief Economist Frank Jullum urged Norges Bank to buy “by the bucketful”.
The crown rose to 12.2870 against the euro at 1144 GMT from an all-time low of 13.1678 earlier in the day, Refinitiv data showed.
“Norges Bank is continuously considering whether there is a need to intervene in the market by purchasing Norwegian kroner,” Norges Bank said.
Danske Bank’s Jullum said on Twitter that the central bank should buy heavily and refrain from announcing the volume of its interventions.
“One advice: please don’t say how much per day, per week, etc or how much altogether, or what is the target for the NOK. Just go into the market and buy crowns, quietly, and by the bucketful,” he wrote.
Norges Bank last intervened in the crown in January 1999, when its official goal was to keep the currency in a narrow band against those of its trading partners.
In 2001, the central bank’s mandate switched to an inflation target, and the currency has since traded freely, even during the volatile months of the 2008-2009 financial crisis.
“In 2009 the central bank said that intervening to strengthen the NOK was not a credible strategy over time. But they can intervene if they see big, short-term movements, for instance due to reduced liquidity in the market,” tweeted Handelsbanken Chief Economist Kari Due-Andresen.
Norway has huge foreign currency reserves, including the world’s largest sovereign fund - worth $880 billion as of Thursday - although its value has tumbled from $1.17 trillion on Feb. 13 as global stock markets plunged.
Reporting by Terje Solsvik and Gwladys Fouche; Editing by Alex Richardson and Hugh Lawson