The strength of the Norwegian krone is an important variable for central bank policy, Norges Bank Governor Oystein Olsen said Tuesday, as the Norwegian krone hovers close to its strongest level ever against the euro and against the currencies of Norway's main trading partners.
"If the krone remains at the present level or strengthens further in coming weeks, we will see change in one important variable compared with October," Olsen said at a meeting with the Foreign Press Association in Norway.
"The krone exchange rate is important," Olsen said. "Future levels and developments in the krone affect our policy."
On February 17, the Norwegian krone reached its strongest level against the euro in nine years, trading at 7.4878, increasing the worries for parts of the Norwegian industry.
Olsen also said that there is a risk for investors moving into the krone.
"I have repeatedly reminded investors we are not like the Swiss franc," Olsen said, adding that the Norwegian krone is fluctuating, and that it might be hard to sell the krone if it weakens.
"I don't give advice to investors, just remind them the door is narrow," he said.
The Governor said that European financial markets and the funding situation for Norwegian banks has improved since the fall of 2011.
"We might be on a more positive track now, but uncertainties remain," Olsen said, adding that the central bank is ready to provide liquidity should funding to Norwegian banks dry up.
"But if banks need long-term help, "it's the government's role," he said.
Asked how much leeway Norges Bank has to lower interest rates with the key interest rate currently at 1.75%, Olsen replied: "But it's not zero."
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