Oil rise forces Petroleum Fund to lift FX buys
NORWAY – The Norwegian central bank is to increase its daily foreign exchange purchases for the Petroleum Fund, Europe’s second largest pension fund, due to higher oil prices.
Norges Bank, which manages the 942.4 billion-crown (114.1 billion-euro) fund, said in a statement that it would purchase foreign exchange equivalent to 630 million crowns per day for the fund starting in Septemnber. This compares to 300 million crowns a day in July.
It said: “The increase in foreign exchange purchases compared with August is due to high oil prices.”
Norges Bank governor Svein Gjedrem said in a speech in Oslo last week that the fund acts as a “buffer” against currency fluctuations generated by oil revenues.
“As mentioned, the Petroleum Fund acts as a buffer against the wide fluctuations in the krone exchange rate that petroleum revenues could have generated,” said Norges Bank governor Svein Gjedrem in a speech in Oslo.
“The capital outflows through the Government Petroleum Fund contribute to both curbing the appreciation of the krone and maintaining its stability.”
The bank resumed buying foreign currency for the fund in July following the rise in oil prices.
The fund’s foreign exchange requirements are partly covered by Norway’s direct financial interest in petroleum activities and partly by Norges Bank’s purchases in the market.
The fund last week said it had funded seven new equity mandates - and that its second quarter return was –0.15%.