The Norwegian krone fell sharply against the U.S. dollar in European deals on Thursday, after Norway's central bank indicated scope for interest rate cut, if there is further deterioration in the economic outlook. Meanwhile, the key policy rate was left unchanged at 1.5 percent, as expected.

The key policy rate will remain between 1 percent and 2 percent till the publication of next monetary policy report on September 18, unless the Norwegian economy is exposed to new major shocks, the bank said.

"A further weakening of the outlook for the Norwegian economy may warrant a reduction in the key policy rate," central bank Governor Oeystein Olsen said in accompanying statement.

The Norwegian krone slipped to near a 2-month low of 8.3237 against the greenback and traded sideways thereafter. On the downside, 8.35 is seen as next possible support for the krone. At yesterday's close, the pair was quoted at 8.1694.

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