- NOK tops 2021 FX board on superior fundamentals.

- But is still undervalued & a buy-on-dips at ABN Amro.

- Oil price corrections offer investors dips to buy into.

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GBP/NOK spot rate at time of writing: 11.57Bank transfer rate (indicative guide): 11.16-11.24FX specialist providers (indicative guide): 11.39-11.49More information on FX specialist rates hereThe Krone is already the New Year's best performing major currency thanks to a superior set of economic and financial fundamentals but occasional bouts of weakness in oil price are likely to offer investors further opportunities to buy the Norwegian currency on dips in the year ahead, according to ABN Amro.

Norways' Krone has been among the first and foremost to benefit from expectations of a robust global economic recovery that helps to sustain an upward recovery trend for the all-important oil market in the years ahead.

This and superior domestic fundamentals enable the Norges Bank to lift its interest rate sooner than many of its counterparts are expected to help sustain the Norwegian currency's strong outperformance in the months ahead.

"Since 10 December the krone outperformed the euro by 3%. This was driven by a rise in oil prices, constructive investor sentiment and stronger than expected Norwegian growth figures. We expect a stronger krone ahead," says Georgette Boele, a senior FX strategist at ABN.

Above: NOK/USD exchange rate shown at daily intervals alongside Brent crude oil price (blue).

Interest rates have been cut to new lows across the world the last year as countries, economies and currencies grappled with the fallout from the coronavirus which began closing down incrementally vast parts of the global economy one year ago this January, beginning in Wuhan, China.

Norway's central bank cut its interest rate from 1.5% to 1% in March 2020 after European economies began to replicate the 'lockdown' that was imposed by Chinese authorities on Wuhan and much of Hubei province, and has since reduced the cash rate to zero.

But ABN and the Norges Bank's policymakers now see scope for rates to begin to rise again as soon as next year.

Above: Euro-to-Krone exchange rate shown at daily intervals alongside Brent crude oil price (blue).

"The central bank projections show a gradual rise in the official rate from the first half of 2022 as activity approaches normal level. This is much quicker than most central banks. This should support the krone this year and next year. Investors are quickly to anticipate this, if sentiment on financial markets remains constructive," Boele says.

Norway's Krone remains some 18% beneath ABN's estimate of fair or fundamental value when the currency is stood next to the Euro, a mispricing which is expected to narrow over the coming years. However, and given widespread expectations of EUR/USD gains over the same period, the anticipated downside in USD/NOK is significant.

The Euro-to-Krone rate is forecast to fall from 10.30 to 10.0 by year-end, a decline of nearly three percent, before falling by five percent to 9.50 in 2022. Meanwhile, USD/NOK is seen falling from 8.48 to 8.0 this year alone.

Above: USD/NOK exchange rate shown at daily intervals alongside Brent crude oil price (blue).

That's a decline of more than five percent but one which gives way to an even larger 8.6% fall, to 7.31, before the curtain closes on 2022.

The Pound-to-Krone rate is expected to fall from 11.57 on Thursday to 11.04 by year-end before declining to 10.60 next year.

"But our energy analyst expects that oil prices will not rise much further in the short term and the risk of a downward correction is substantial. It is likely that oil price weakness will result in a temporary sell-off in the krone as well. We think that such a sell-off would be an opportunity to position for a higher krone later," Boele says. "All together, we think that the krone is an attractive currency."

Above: Pound-to-Krone exchange rate shown at daily intervals alongside Brent crude oil price (blue).