Norwegian sovereign wealth fund and currency
Norway is one of the richest advanced economies in the world thanks to decades of oil exports. Revenues have been invested in the Norwegian sovereign wealth fund, managed by the country’s central bank, Norges Bank. Total assets recently exceeded 12 trillion krone – around USD1.3 trillion, making it one of the largest funds in the world.
As almost all assets are held in foreign currencies, the fund’s NOK value fluctuates substantially depending on exchange rate movements. In recent years, changes in market value and FX fluctuations have moved in opposite directions.
Thanks to surging oil prices, Norway has enjoyed significant windfall gains; its export volume has never been higher. This has resulted in a large appreciation of the krone – leading the central bank to intervene in FX markets again by buying large amounts of foreign currencies to prevent further increases. This could lead to substantial deflationary pressures in the domestic economy.