MARKET TALK: Krone Sensitivity To Oil Seen Fading -BNP Paribas

The Norwegian krone's sensitivity to the price of oil is expected to fade, according to BNP Paribas. It adds that the fall in EUR/NOK since the beginning of the year has been closely tied to the rise in oil prices, with a 10% rise in the oil price causing a 2% fall in EUR/NOK. But with policy makers concerned about NOK strength and Norges Bank's selling of NOK for the oil fund, the impact of further rises in oil on the krone may be reduced. "The domestic headwinds to NOK suggest, however, that the currency is likely to underperform oil, and to take advantage of this, we recommend a long EUR/NOK position, but with the oil impact hedged with a long position in Brent oil," BNP Paribas adds. EUR/NOK trades at 7.4879.(