(Bloomberg) -- A potential tweak to the way in which the Norges Bank manages its foreign exchange reserves may not be a game changer when it comes to boosting the ailing Norwegian krone, according to a senior official at the Norwegian central bank.
Norges Bank is considering two options in which it can change its approach to currency reserves, a decision that is yet to be finalized but will “soon” be communicated to the market, the central bank’s executive director of monetary policy Ole Christian Bech-Moen told analysts at a seminar in London on Thursday.
The krone is one of the worst performing currencies out of its Group-of-10 peers this year, yet strategists say the currency may rebound in the short term if the Norges Bank chooses to start buying it in response to a shift in the government’s liquidity management policy.
“I have been asked in the past if this is a potential game changer — I just want to mention that this is only when the FX reserves are growing that the change will have an impact and there is no guarantee that FX reserves will be growing considerably over time,” he said.
Governor Ida Wolden Bache said in October that if officials opt to sell FX reserves, they will do so in a manner than will ensure minimal impact on currency markets. Bech-Moen added the impact of the tweak on the currency depends on the performance of financial markets over time.
“If flattish markets, the FX reserves will not grow that much and it will not have a big impact on whether we choose A or B or the two options,” he said. “Don’t exaggerate this change.”
©2024 Bloomberg L.P.