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Currencies |
| NORWEGIAN KRONE |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of Norwegian krone | Weekly
trend of Norwegian krone |
| Introduction |
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Krone is the official currency unit of the countries that were
once a part of the Scandinavian Monetary Union that are Denmark,
Norway and Sweden (called krona). The word "krone" is
the synonym of English word "crown" and in plural form
it is known as "kroner". "Øre" divides one
unit of krone into 100 equal parts as it serves as the subunit of
the currency. In plural form also, the word øre is called by the
same name. The symbol with which the currency unit is depicted
remains the same i.e. "kr", indifferent of the country
in which it is used.
Norwegian krone is the national currency of
the Kingdom of Norway. It has been used as the basic unit of
exchange since 1875 when it replaced rigsdaler as a result of
Norway’s induction in the Scandinavian Monetary Union. The ISO
4217 code defines the currency code of Norwegian krone as NOK and
has set the numeric code of the currency as 578.
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Overview
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Norway has got a very small population and that is why it is
considered a small economy as compared to the other economies in
Europe. A high GDP of the country supported by a small population
makes it one of the wealthiest nations of the world. The exclusive
feature that makes it a different economy is its large offshore
sector. Norway is the third largest exporter of crude oil in the
world that provides with a major share of the country’s revenue.
With the boom in the demand of crude oil in the recent years,
Norway has come out as one of the strongest of economies. The
currency of the country i.e. Norwegian krone has also done well
and is one of the few currencies that have grown stronger against
even Euro and US dollar. The value of the currency is largely
dependent upon the world crude oil prices and interest rates.
There are no import and export restrictions
in context of both local and foreign currencies till the amount
25000 kroner. The amounts exceeding this amount have to be
declared with the authorities. Norwegian krone is also accepted as
legal tender in Bouvet Island, Jan Mayer, Peter I Island, Queen
Maud Land, and Svalbard other than in Norway.
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Structure
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The currency unit of Norway i.e. krone has its
subunit as øre @ 1 krone = 100 øre. The
functions of central bank in the country are
held by the Bank of Norway also called the
Norges Bank that was established in 1816. The
bank takes up the responsibility of deciding the
denominations and the designs for the notes and
coins and also has the sole authority to issue
the currency. As for the banknotes, the current
series includes 5 denominations of notes that
are 50, 100, 200, 500 and 1000 kr. All the
banknotes have different color patterns so that
it can be easy to differentiate them. The sizes
of the notes are directly proportional to their
face values i.e. the higher value note will be
having a bigger dimension. The obverse of all
the notes has portrait images of important
people in the history of Norway and the reverse
sides of the notes depict images symbolizing the
pieces of their work. The details are mentioned
in the list below
The coins are also minted
in 5 denominations that are 50 øre, 1, 5, 10,
20 kr. The coins are of three different colors
namely brown, silver and gold and the color of
coins is based upon the former coinage system in
which the lower values were minted using bronze
and higher value coins were made of gold. Hence,
the smallest value in this case i.e. 50 øre is
brown color; the coins of the denominations 1
and 5 kr are silver in color and of the
denominations 10 and 20 kr are golden in color.
The coins are embossed with symbolic images on
the obverse and reverse sides, the details of
which are given in the following table
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50 øre coin - Front
side depicts king’s crown and backside
shows a fable animal
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1 kr coin - Obverse of
the coin has an engraved image of monogram
of Harald V and reverse side possess an
image of a fowl bird
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5 kr coin - St.
Olay’s order is symbolized on the front
side of the 5 kr coin and the acanthi leaves
are depicted on the reverse side
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10 kr coin - An effigy
of Herald V is shown along with the motto
"Alt for Norges" on the obverse
side and the roof of stave church is shown
on the backside.
- 20 kr coin - the obverse side again
contains the effigy of Herald V but the
reverse side has an image of a Viking ship
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| History |
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The earliest known evidence relating to the history of
currency in Norway is said to be a penny coin issued
under the reign of king Olav Tryygvason around in as
early as 1000BC. The coin was influenced by the penny
coin of England’s Etherlred II. During that time,
the minting function was totally a royal function and
nobody was allowed to mint the coins privately. In
1387, when the throne of Norway collapsed, it came
into union with Denmark and Sweden that lasted till
1814. The initial part of this time span saw no
issuance of any currency with in the country and
Norway had to import currency to fulfill the daily
exchange requirements. The country followed the Danish
currency system with the basic monetary unit as Gold
Krone and Rigsdaler Courant and the Rigsbankdaler
being the other units of exchange. In 1628, for the
first time in the history of Norway, a mint was
established, located in Christiania in the beginning
but later on moved to Kongsberg. It minted silver
coins using the silver from the mines located in
Kongsberg. Also, the bank notes also started gaining
importance till the end of 1600s.
In 1736, a private bank named
"Courantbanken" was established that became
the first issuing bank in Denmark-Norway. The bank
issued the currency according to the royal regulation
but there was no limit upon the quantity of currency
to be issued. This led to the over issuance of
currency and the value of the currency had to face a
downfall. Finally, in 1791, as a corrective measure a
new bank was launched, Den Danske og Norske Speciebank
and a new set of regulations were evolved for the
bank. But it did not serve the purpose of cleaning the
monetary system and hence the power of a central bank
was shifted to a new bank named Deposito-Cassen. Due
to this severe state of affairs of the economy and the
devaluating currency, Norway detached itself from the
union with Denmark and got into a new union with the
already independent Sweden in 1814. In 1816, the
monetary unit of Norway was changed to "speciedaler"
or "rixdollar" according to the Act of
Storting and the central bank of Norway today i.e.
Norges bank came into existence. The currency finally
got further devalued in 1830 and after steady
devaluation it was pegged to silver on a fixed basis
in 1842.
In 1875, Norway joined the
Scandinavian Monetary Union and according to the terms
and conditions, it had to adopt krone and ore that was
based on gold as its official currency unit instead of
daler and skillings, which was based on silver
standards. The union lasted till 1914 and got diluted
due to the outbreak of the First World War. The three
countries were free from the union, but they decided
to use the same currency unit i.e. krone as their
official currencies. Norway left the gold peg of the
currency in 1931 and started to get valued at a fixed
rate with the pound. The currency was again revalued
according to the dollar standard in 1939 and because
US dollar was linked to gold, it made krone to be
linked with gold again. After World War II, Norway
adopted the Bretton woods system in which its value
was fixed against gold. When the system collapsed in
1971, the krone was floated freely in the market. The
unit was again linked to a basket of currencies from
1978 and to the European currency unit in 1990 till
1992. Since then, it follows a floating rate regime.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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