NOK: Vulnerable to the liquidity shock - ING

After the Australian dollar, the Norwegian krone has been the worst-performing G10 currency over the last week, ING's FX analyst Chris Turner notes.

NOK/JPY can make a break towards the 12.00 area

"It has taken a big hit both from the fall in oil prices (an OPEC+ supply increase was a big shock) and the fact that Norwegian interest rates have some of the furthest fall to given the previously hawkish stance of Norges Bank. What may well impact the NOK as well is declining liquidity."

"This generalised rise in volatility, increasing investors' value-at-risk metrics and forcing deleveraging, will impact FX liquidity. The NOK traditionally performs very poorly in illiquid environments, which could be the story this week."

"Expect investors (those with the ability to establish new positions) to be looking at a pair like NOK/JPY. Were things to get really ugly this week in financial markets, NOK/JPY could make a break towards the 12.00 area."