Nordic Currencies: Norway's Krone Falls as Manufacturing Slows

By Bo Nielsen

Sept. 2 (Bloomberg) -- Norway's krone fell for a fourth day against the dollar as oil prices plummeted and an industry report showed manufacturing contracted in August.

The krone also declined versus the euro as Copenhagen-based Danske Bank A/S said its manufacturing industry index, based on the responses of 300 purchasing managers, fell to an adjusted 48.4 in August, from 51.7 in July. A figure above 50 signals expansion. Economists had expected 50.3, according to the median of seven estimates in a Bloomberg survey. Policy makers next meet to decide interest rates on Sept. 24.

The Norwegian currency dropped 1 percent to 5.5054 per dollar by 9:47 a.m. in Oslo, from 5.4492 yesterday. It traded at 7.9914 per euro, from 7.9655.

Oil prices sank to the lowest since April as Hurricane Gustav passed the U.S. Gulf Coast without causing major damage to offshore platforms. Crude declined to as low as $108 a barrel before trading at $108.72. Oil is Norway's biggest export.

The Swedish krona fell to 6.5218 per dollar, from 6.4703 yesterday, and traded at 9.4594 per euro, from 9.4578.

The Riksbank meets to review its 4.5 percent benchmark interest rate on Sept. 4. It will raise the rate a quarter-point this week, according to the median estimate of 22 economists in a Bloomberg survey. Eight of the analysts in the survey predicted the Riksbank will keep rates on hold.

The bank lifted borrowing costs for a second time this year in July.

In other trading, Iceland's krona slipped to 84.38 per dollar, from 83.92.

Nordic government bonds fell, with the yield on Sweden's 5.25 percent note due March 2011 rising 2 basis points to 4.26 percent. The yield on Norway's 6 percent bond maturing May 2011 increased 1 basis point to 5.05 percent. Yields move inversely to bond prices.

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