NORWAY – Norges Bank has said it won’t be buying foreign exchange for the Petroleum Fund in January amid a move to scale down the size of the buffer portfolio.

“Norges Bank will not purchase foreign exchange in January 2005,” the central bank said in a statement. “This is partly because the November allocation to the Petroleum Fund was substantially reduced.

It said: “In addition, some of the SDFI’s [state’s direct financial_interest] foreign exchange income in December was transferred to the buffer portfolio to minimise the Government’s transaction costs.

“Norges Bank intends to reduce the size of the buffer portfolio during the first quarter of 2005. A substantial part of the reduction will take place in January.

The E121.1bn scheme’s foreign exchange requirements are partly met by the state’s direct financial interest in petroleum activities and partly by Norges Bank’s purchases in the market.

The Ministry of Finance determines the size of the monthly allocations to the Petroleum Fund. Norges Bank’s purchases of foreign exchange are equal to the difference between the allocations and SDFI’s estimated foreign exchange revenues. Adjustments are made for any revisions of estimates for the previous month.

In October Norges Bank said it would suspend its foreign exchange purchases on behalf of fund in December due to a lack of liquidity in the markets at that time.