Norway’s Central Bank Allows Currency to Float.
OSLO, Norway (AP) _ The country’s central bank gave up the battle to defend the value of the national currency today and the krone immediately lost as much as 5 percent of its value against the dollar.
Finland devalued its currency in September, and Sweden followed suit last month. All three Nordic countries had tried to defend their currencies to give an image of economic stability as they seek to join the 12-nation European Community.
Kjell Tangen, of the commercial Christiania Bank, said the exchange rate against the dollar fell to about 6.90 on the news, from about 6.45.
Kjell Larsen, of Norway’ largest commercial bank - Den Norske Bank - cited the same 5 percent decline.
The central Bank of Norway also cut its overnight marginal lending rate to 11 percent from 16 percent. The rate had gone as high as 25 percent.
The bank’s attempts to defend the krone by increasing domestic interest rates and using national foreign currency reserves had proved inadequate, the Finance Ministry said in a statement.
The ministry said the krone would be allowed to float for up to 30 days.
Europe’s currency exchange rates have been swinging wildly for months as investors lured by high German interest rates dump other currencies to stock up on marks.
The resulting confusion makes it difficult for business managers to plan.