Norges Bank’s foreign exchange transactions in August 2020
Norges Bank will sell foreign exchange on behalf of the government equivalent to NOK 2000 million per day in August 2020.
Norges Bank purchases foreign currency from the State's Direct Financial Interest (SDFI) each month. If the government’s net cash flow from petroleum activities exceeds the non-oil budget deficit, some of the foreign exchange purchased from the SDFI is transferred to the Government Pension Fund Global (GPFG). Norges Bank sells the remaining amount in the market.
If the government’s net cash flow from petroleum activities is insufficient to cover the non-oil budget deficit, foreign exchange will be transferred from the GPFG to cover some of the budget deficit. Norges Bank will then sell foreign exchange from the GPFG, as well as the foreign exchange from the SDFI, in the market. Norges Bank performs this task on behalf of the government.
Foreign exchange transactions will be somewhat lower ahead than previously assumed to ensure sufficient foreign exchange available for sale. For its foreign exchange transactions, Norges Bank uses a separate portfolio called the petroleum buffer portfolio (PBP). The PBP receives the government’s cash flow from petroleum activities in foreign currency and is used for transfers to and from the GPFG. The recent large transfers from the GPFG have reduced the share of NOK purchases that are financed through the month. The daily transactions entail a decline in the PBP through the month before it rises markedly when funds are transferred from the GPFG on the last trading day of the month. The lowest level of the PBP through the month sets a limit on the size of daily NOK purchases. In planning transactions, Norges Bank will seek to avoid situations where the level of the portfolio falls below zero.
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