With a lack of market-moving economic data released on Tuesday, the Norwegian Krone exchange rate was influenced by geopolitical events and oil price fluctuations. Early in the session, the Krone was softer against the Pound due to softer oil prices. Speculation that US oil inventories and Saudi Arabian oil production will hit a record high before the end of the month sent oil prices sliding.
As the session progressed, the Norwegian currency firmed as oil prices rose on the back of fears that the conflicts in the Middle East could escalate. Fighting is raging in Iraq, Syria, Libya and the Yemen and fears are growing that the violence could get worse. As many Middle Eastern nations are members of OPEC, speculation is mounting that oil production in the region could be negatively affected.
A US aircraft carrier has been dispatched to the strategically important waters off Yemen to support other US warships preparing to block an Iranian convoy thought to be heading to the port city of Aden. The USS Theodor Roosevelt is a massive vessel that carries a large number of fighter jets; the move has been classed as a deterrent and show of force in the volatile region.
‘We have seen evidence that the Iranians are supplying weapons and other armed support to the Houthis in Yemen. That support will only contribute to greater violence in that country. These are exactly the kind of destabilising activities that we have in mind when we raise concerns about Iran’s destabilising activities in the Middle East,’ said White House Press Secretary Josh Earnest.
Tensions in the region are building despite the USA and other world powers rushing to reach a deal with Iran on its nuclear programme by the end of June. The conflict in Yemen, where US ally Saudi Arabia is leading a military alliance against Iranian backed rebels, is complicating matters.
The conflict in Syria, and to an extent the war against ISIS in Iraq, has been classed as proxy wars between Saudi Arabia and archrivals Iran. Fears are building that the Yemen conflict could trigger a direct confrontation between the two regional powers.
The Pound Sterling, meanwhile, weakened against the Norwegian Krone and other major peers due to the uncertainty over the outcome of the May 7 general election.
With no Norwegian data due until next week, the NOK exchange rate will be heavily influenced by oil price fluctuations.
As the European session progressed on Tuesday the Norwegian Krone to Pound Sterling exchange rate was trading in the region of 0.0850.