NOK set to weaken as the Evergrande crisis weighs on sentiment – Nordea

A troubled Chinese property development group, Evergrande, has given rise to contagion fears in financial markets. Stock markets have fallen and as usual, the NOK has weakened. The Norwegian krone is no safe haven in troubling times and could easily weaken further if the sour sentiment persists, economists at Nordea report.

See – China: Systemic risks to be avoided following the fall of Evergrande – Natixis 

Evergrande troubles for NOK

“Norges Bank’s rate hike this week could easily be overshadowed by the uncertainty arising from China. Evergrande, one of the largest Chinese property development groups, has financial troubles and is at risk of default.”

“Markets don’t expect any clear signals from the Fed this week on the reduction of stimulus (tapering of QE), so any hawkish surprise could have a further negative effect on sentiment.”

“EUR/NOK could see some resistance near 10.30 and then 10.37. However, if matters truly get worse then EUR/NOK could easily move above 10.50. 

“USD/NOK is currently trading near the 50-day moving average at 8.80, which provides some resistance. However, troubled times usually correspond with a stronger USD and weaker NOK, so the upside is clearly there.”