Forex Flash: Increased US participation in Scandinavian markets alters NOK and SEK – UBS

The final week of February and first week of March witnessed near record-net flows in USD/NOK buying from our clients, while the EUR/NOK was actually flat. “The increased participation of US asset managers in Scandinavian markets over the past two years has fundamentally altered the dynamic of both NOK and SEK markets: no longer can other pairs anchor themselves to NOK and SEK's exchange rates with the EUR, irrespective of the importance of the currency in Scandinavian trade baskets.” writes Research Analyst Gareth Berry at UBS.

In addition, as USD-based liquidity is not subject to the whims of Eurozone event risk and large in size in any case (such is the firepower of US asset managers), the we now need to accept the role of USDNOK as an equal driver, and sometimes the USD, rather than NOK is the 'issue'.