Growing demand for NOK

Market participants trade NOK in the foreign exchange market every day, yet there is no comprehensive overview of all these transactions. To understand the long-term drivers behind the NOK exchange rate, we compiled a dataset covering the largest market participants that we can reliably track: Norges Bank, oil and gas companies, life and pension companies, foreign direct investments (FDI) and the mainland trade balance.

In principle, purchases and sales of NOK should always balance in size. The key factor for the exchange rate is not gross volumes but whether there is a persistent net need to buy or sell NOK over time. Our analyses indicate that shifts in these net flows, rather than their level, drive the NOK exchange rate. Fluctuations in the sum of structural NOK transactions have largely tracked EUR/NOK since 2008 – with the pandemic in 2020 as a clear exception.

After 2014, several structural factors have contributed to weakening the NOK. Net FDI have become increasingly negative, as Norwegian companies invest more abroad than foreign investors do in Norway. At the same time, the mainland trade balance has become more negative, primarily as a result of increased import volumes. In 2022, the NOK faced further headwinds when Norges Bank shifted from being a net buyer to a significant net seller, while life and pension companies sold NOK to maintain stable currency hedge ratios amid falling asset prices.

Since 2023, these net flows have been relatively stable, and EUR/NOK has largely moved sideways. However, for 2026, the picture looks different. Based on current forward prices, we estimate that oil and gas companies’ tax payments will fall this year. Meanwhile, state revenues from the petroleum sector will be lower than the estimated oil-adjusted budget deficit. This means Norges Bank will have to buy a substantial amount of NOK to cover the oil-adjusted budget deficit for this year. Norges Bank will thus shift from being a net seller of NOK to a net buyer. In December, Norges Bank announced that it will buy NOK 776m every day throughout January (see Chart A). Overall, the changes in the most important structural currency flows indicate that the NOK will strengthen somewhat in 2026. After many years of negative underlying pressure, it now appears that the balance in the NOK market is starting to tilt in a more positive direction.