NEW YORK (BBH FX Strategy) -- The Norwegian krone and Swedish krona are the strongest major currencies Friday, appreciating about 0.85% and 0.6% respectively. While the fundamental justification of the more modest gains in the other major foreign currencies may be more elusive, in the Scandi's case, fundamental developments are supportive.Sweden reported stronger business and manufacturing confidence numbers earlier this week, but the February retail sales report was a more significant catalyst. Retail sales rose 1.2% in February. The consensus was for a 0.1% rise. The Riksbank's Ekholm suggested Friday the economy appears to have bottomed after a 1.1% contraction in fourth quarter. This week's data seems to further rule out a rate cut in April, which many had previously expected.
Second, February retail sales surged 1.1%. The market consensus called for a 0.2% decline. Third, the central bank indicated that it would sell NOK350 per day in April, unchanged from March. The market had expected an increase in the NOK sales. Fourth, and admittedly less meaningful for short-term currency movement, Norway's sovereign wealth fund reported that it had cut European bond exposure to 40% from 60% and European equity exposure to 38% from 47%. It boosted emerging market equities to 12% from 9%. It also increased Asia-Pacific bond exposure to 11% from 5%. The Norwegian krone is among the worst-performing major currencies this month following the unexpected rate cut earlier this month. However, it looks poised to recover in the coming weeks. The euro is currently near NOK7.60 and the risk extends toward NOK7.65, but there is potential back to NOK7.48 to NOK7.50 over the next couple of weeks.