USDNOK is the ticker symbol for the US dollar to Norwegian krone exchange rate in the forex markets. USDNOK is an exotic currency pair because one of its constituent currencies is that of an emerging nation, Norway. Exotic currency pairs typically feature low trading volumes and overall illiquidity and are traded with relatively higher spreads than major currency pairs.
In the USD/NOK Forex rate, the USD is the base currency, whereas the NOK is the quote/counter currency. Thus, the price of the USDNOK pair at any given time represents the amount of Norwegian krone it would take to exchange for one unit of the US dollar (1 USD to NOK).
History of USDNOK
The US dollar needs no introduction. It is the official currency of the United States of America and its territories. It has been nicknamed the ‘greenback’ due to the predominantly green colour of its notes throughout its history. The USD is considered the ‘world’s reserve currency,’ and it has stood out as the most powerful currency for many years now. It is responsible for over 80% of daily trading volumes in the forex markets. Most of the global trade and finance are denominated in the USD. But this was not always the case, and the USD has had an exciting journey over the years. It was introduced in 1792, but the fall of the British Empire in the early 20th century set the way for the USD to achieve its current status. Most currencies at the time were pegged to Gold, and over time, the US had accumulated the most deposits of the rare commodity. The defining moment for the currency came in the 1940s when countries around the world adopted the Bretton Woods System. The system saw many major countries peg their currencies to the USD simply because of the massive Gold deposits held by the USA. By the time the system was abolished, the USD had risen to the top and has stayed there.
While the USD is the most traded currency globally, the NOK currently stands as the 14th most traded, as of March 2022. It was introduced in 1875, replacing its predecessor (the Norwegian speciedaler) at the fixed exchange rate of 1 speciedaler = 4 kroner. The NOK is a popular exotic currency due to the wealth and stability of the Norwegian economy. Norway is one of the wealthiest countries in the world, and it boasts massive natural resources such as oil and gas, fisheries, and hydroelectric power. The country also has a large public sector and highly developed manufacturing and shipping industries. The stability of the Norwegian economy has seen some investors consider the NOK as a potential safe-haven currency. Still, its sensitivity to the oil and gas markets is a significant undoing. Norway is also a major trading partner of the Eurozone and Great Britain, and developments in these economies can impact the NOK. Nevertheless, the NOK is the currency that gives the best exposure to the Scandinavian countries and has been freely floated in the markets since 1992.
USDNOK Historical Price Performance
In the early years of the 21st century, the USD to NOK traded around the 7.00 area. But it gradually edged lower, and by mid-2008, it traded around the 5.11 region. It then entered a period of sideways trending but picked up upward momentum in mid-2014. The USDNOK pair broke above the psychological 8.00 barrier in January 2015 and above 10.00 in February 2020. It printed its all-time high above 10.40 in March 2020. It has since corrected the sharp rally and currently trades around the 8.60 area.
Major Bodies Influencing the USDNOK – USD to NOK Trading
When you engage in USD/NOK trading, here are some things to look out for:
The Federal Reserve
The Federal Reserve is the central banking system of the United States of America. It is considered the most powerful central bank globally by virtue of issuing and managing the ‘world’s reserve currency.’ The Federal Reserve releases its interest rates eight times a year. Typically, higher rates strengthen the USD, whereas lower rates pressure it lower. USD traders also watch out for the accompanying rate statements; a hawkish tone will strengthen the USD, whereas a dovish stance can weaken the greenback value.
Norges Bank is the central bank of Norway. In addition to traditional central bank functions, the Norges Bank is also tasked with managing the Pension Fund on behalf of the Norwegian Government. Norges Bank releases its interest rates eight times a year and its monetary policy reports four times a year. It is the single largest body that influences the NOK.
Statistics Norway is the national statics agency for Norway. Its main economic indicators can influence the monetary policy decisions of the Norges Bank. The leading indicators watched by NOK traders include the GDP, Consumer Price Index, Average Wages, and Unemployment.
Currency correlations can help traders identify unique trading opportunities and avoid increasing their risk exposure in the markets. USDNOK tends to be positively correlated (moves in the same direction) with pairs such as the USDCAD, USDMXN, EURSEK, and GBPNOK. USDNOK also tends to be negatively correlated (moves in the opposite direction) with pairs such as the NOKJPY, SEKJPYGBPJPY, and EURJPY.
** Disclaimer –While due research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.