I am long Norwegian Kroner into 2021. Why?
1. The Norges Bank (central bank in Oslo), moved the timing of rate hikes by two quarters and thus unnerved FX market consensus on Nokki.
2. The dovish Powell Fed and a hawkish Norges Bank is a compelling argument to accumulate the Norsk kroner at 8.65 to 870 for a 7.80 target.
3. FX option markets predict Norwegian kroner will be the best performing G10 currency against the US dollar in 2021. For once, I agree with the options geeks.
4. The Norwegian Kroner has been historically correlated to upswings in the global economic cycle as the vaccine rolls out, reflation themes will be mode du jour in Planet Forex and the Norwegian Kroner is the ultimate Scandie reflation proxy.
5. The Norwegian economy has not been hit as hard as Sweden, Britain, France or even Germany from the pandemic.
6. Norwegian kroner is a petrocurrency as oil and gas are 50% of exports. Chinese demand and low global inventory could mean a stronger rally in black gold than the Brent futures curve suggests. Add a positive yield spread and I have a compelling case to borrow USD and invest in Norwegian kroner placements.
7. FX options markets suggest selling the Loonie against the Nokki, which means dump Ottawa to embrace Oslo!
Matein Khalid is the Chief Investment Officer of Asas Capital Management. He has 25 years of experience in international capital markets as an advisor to family offices and fund managers. He has worked for investment banks/hedge funds in New York, Chicago, London, and Geneva. In addition, he has been the CIO of a technology fund in San Francisco, a royal investment office in Dubai and a public insurance company listed on the DFM.
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