Norway’s Krone: An Embodiment of A Reserve Currency?

Economist Paul Kasriel of Northern Trust recently opined that the Norwegian Krone could be the next currency reserve.

Courtesy of Northern Trust

Given that the Norwegian Central Bank recently continued with its monetary tightening measures by raising interest rates even amidst signs of an economic slowdown, ``That puts the Norges Bank’s policy rate 293 basis points over the May year-over-year CPI inflation rate on a harmonized basis. Notice that the Norges Bank was raising its policy rate in the first half of 2007 as the inflation rate was falling. The Norges Bank is offering savers an “honest” return on their funds. Isn’t this what you would look for in a reserve currency’s central bank?” remarks Mr. Kasriel.

What Mr. Kasriel means is that unlike the conventional practices of many global central banks including the de facto world reserve currency, the US dollar represented by the US Federal Reserve, Norway’s Krone offers positive real returns or a premium over inflation or the embodiment of an equivalent sound money policy in operating under today’s paper money standard landscape.

Well, the Norway Krone is likewise a bet on the natural resources like oil exports which accounts for about 51% share of total exports or 25% of the country’s GDP in 2006 (Norwegian Petroleum Directorate).

Anyway the Krone is up by about over 35% since 2003 see yahoo chart above.

With oil at trading at near $140 could we be seeing more upside for the Krone?