© Reuters. FILE PHOTO: An illustration image shows Icelandic banknotes worth one thousand kronor in Reykjavik, Iceland, in this March 23, 2012 file photo. REUTERS / Ingolfur Juliusson / Files
OSLO (Reuters) – The Swedish and Norwegian currencies will gain ground against the euro over the next 12 months, which is likely to reach multi-year highs at a time of strong economic recovery in the Nordic region, a Reuters survey of analysts predicted.
Sweden and Norway recently ended almost all remaining social restrictions among a high uptake of COVID-19 vaccines and a corresponding reduction in infections, which means that companies can thrive.
After crashing when the coronavirus hit last year, currencies have recovered to trade slightly stronger against the euro than their pre-pandemic levels. They will continue to rise, but the probability of winning is more limited, the survey showed.
Norway’s krona has increased by about 6% since the end of August to trade at around 9.94 against the euro and may move to 9.83 in the coming year, the survey shows, which would be the strongest level since January 2020.
Analysts attribute the krona’s rise in recent weeks to hawkish monetary policy and rising prices for Norway’s oil and gas https://www.reuters.com/business/energy/fossil-fuel-demand-shakes-off-pandemic-blow -climate-fight- 2021-10-04 export.
Last month, Norges Bank raised https://www.reuters.com/world/europe/norway-raises-interest-rates-says-another-hike- likely-December-2021-09-23 for the first time since 2019 and is planning further four increases over the next 15 months, with the next tightening pencil in for December.
But the often volatile Norwegian currency also risks declining in periods and is expected to be weaker than the current level at the end of 2021 before rising again next year.
“NOK is not a safe haven in troubled times and can easily weaken if market sentiment worsens,” warned Nordea Markets.
In Sweden, where the currency has weakened slightly against the euro this year, the krona is expected to make gains over the next 12 months to reach its strongest level since the beginning of 2018, the survey showed.
The Riksbank has kept its reference rate at 0% and expects to keep it there for several years despite strong economic recovery and above-target inflation.
However, some economists see the recovery in the Swedish economy as an opportunity for the central bank to adjust its overall monetary policy strategy in 2022.
“The stars are starting to adapt behind our perception that decision-makers will start to drop their balance sheets next year,” Capital Economics said in a new note to customers.
The Reuters survey predicted that the Swedish currency would make gains of about 2.5% against the euro to trade around 9.92 in a year, the median forecast shows.
(For other stories from the currency survey in October Reuters 🙂
Fusion Media or anyone involved in Fusion Media will not take any responsibility for any loss or damage resulting from reliance on the information including data, quotes, charts and buy / sell signals contained on this site. Be fully informed about the risks and costs associated with trading the financial markets, it is one of the most risky forms of investment.