Nordic Currencies: Norway's Krone Advances Before Sales Report

By Bo Nielsen

Aug. 29 (Bloomberg) -- Norway's krone gained versus the dollar before a government report forecast to show retail sales rebounded in July, strengthening the case for the central bank to raise interest rates next month.

The krone headed for its steepest monthly drop in 3 1/2 years before a report from Statistics Norway that economists forecast will show sales climbed an annual 2.6 percent, after gaining 0.1 percent in June. The data is due at 10 a.m. in Oslo.

``Norges Bank is expected to hike at its September meeting due to strong underlying inflation,'' Geoffrey Yu, a currency strategist in London at UBS AG, the second-biggest foreign- exchange trading bank, wrote in a client note. ``We expect krone strength to be tempered if oil fails to rally and the policy outlook turns dovish.''

The Norwegian krone climbed to 5.3730 per dollar by 9:12 a.m. in Oslo, from 5.3855 yesterday, paring its decline this month to 4.8 percent. It was little changed at 7.9186 per euro, leaving it 1.1 percent higher than at the end of July.

The central bank, which has raised its key interest rate twice this year, to 5.75 percent, indicated in June it may deliver one more increase by December. It meets on rates Sept. 24.

In other trading, Sweden's krona was steady at 6.4062 per dollar, and fell 0.2 percent to 9.4396 per euro. Iceland's krona advanced to 82.64 per dollar, from 82.73 yesterday.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net