Norway is confronting both a strong currency and a housing boom, complicating interest rate policy.

Quick, think of the safe haven currencies.

Did you include the Norwegian krone? You should.

Despite its relatively low liquidity, "the sheer shortage of viable alternatives has meant that the Norwegian unit has remained firmly in demand through the course of the Euro-area crisis," say the currency strategists at Bank of New York Mellon. Strong oil prices don't hurt either.

Norway doesn't like having a strong krone   any more than Switzerland does because it places such a drag on export-driven industries. But so far, interest rate cuts have failed to stem the krone's rise.

Even more problematic is the fact that "Norway is home to a particularly impressive house price boom," the strategists wrote in a note to clients. They add that a study of the Norwegian property market by the San Francisco Fed - yes, the San Francisco Fed - found "that Norwegian property prices are currently 125% of their historic price-to-income ratio and, even more frothy, some 170% of their historic price-to-rent ratio." Any reduction in interest could wind up giving the real estate market even more steam.

What does this mean for the krone? It's not clear yet, but the Bank of New York strategists have identified a few clues. They note that the central bank has indicated willingness to raise rates by December, but add that "fears are justifiably growing that this may prove to be too little too late." Exporters may have to learn to live with higher interest rates, a strong krone, and a currency-driven slowdown, they say, if the housing market has a chance of cooling.

In the strategists' words, "a ‘dual speed’ economy would be the ‘lesser of two evils’ and a lesson learnt from the economic malaise that exists across much of the post-bubble Western world."

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