OSLO, October 7 (Reuters) – The Swedish and Norwegian currencies will gain ground against the euro over the next 12 months, likely reaching multi-year highs at a time of strong economic recovery in the Nordic region, a poll predicted Reuters to analysts.
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After plunging when the coronavirus hit last year, currencies rallied to trade slightly stronger against the euro than their pre-pandemic levels. They will continue to rise, but the likely scope of the gains is more limited, according to the poll.
The Norwegian krone has risen by around 6% since the end of August to trade at around 9.94 against the euro and could rise to 9.83 in the coming year, according to the survey, which would be its lowest level. highest since January 2020.
Analysts attribute the rise in the krona in recent weeks to hawkish monetary policy and soaring prices for Norwegian oil and gas exports.
Last month, Norges Bank hiked rates for the first time since 2019 and is forecasting four more hikes over the next 15 months, with the next tightening slated for December.
But the often volatile Norwegian currency is also likely to experience periods of decline and is expected to be lower than its current level at the end of 2021 before rising again next year.
“NOK is not a safe haven in times of turmoil and could easily weaken if sentiment in the markets deteriorates,” Nordea Markets warned.
In Sweden, where the currency has weakened slightly against the euro this year, the krone is expected to make gains over the next 12 months to reach its highest level since early 2018, according to the poll.
The Riksbank has kept its benchmark repo rate at 0% and expects to maintain it for several more years despite a strong economic recovery and above target inflation.
Nonetheless, some economists see the rebound in the Swedish economy as an opportunity for the central bank to change its overall approach to monetary policy in 2022.
“The stars are starting to align behind our view that policymakers will start to allow the balance sheet to shrink next year,” Capital Economics said in a recent note to clients.
The Reuters poll predicted that the Swedish currency would gain around 2.5% against the euro to trade at around 9.92 in a year, according to the median forecast.
(For other articles from the October Reuters currency poll:)
Reporting by Terje Solsvik in Oslo; surveys by Prerana Bhat, Sarupya Ganguly and Indradip Ghosh in Bengaluru; Editing by Jonathan Cable, Kirsten Donovan
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