OSLO (Reuters) – The Swedish and Norwegian currencies will gain on the euro and dollar towards the end of this year and into 2022 as the global economy rebounds from the coronavirus pandemic, a Reuters poll of analysts showed.
Having suffered a plunge in value during the first wave of COVID-19 a year ago, the Swedish and Norwegian crowns have both made gradual recoveries.
Heavily reliant on exports, from commodities and industrial goods to high-tech and services, the two countries are well-placed to benefit economically when vaccinations against the virus accelerate and international trade normalises.
In Norway, whose oil industry has been boosted by a rebound in crude prices, the central bank has pencilled in a rate hike no later than December this year, putting it first in line among developed economies to increase post-pandemic borrowing costs.
A hike would mark a sharp reversal for Norges Bank, which last year slashed rates to a record low 0% to boost the economy, and resorted to currency intervention for the first time in more than two decades to prop up the crown.
“As it happens, given the momentum in oil prices and the housing market, we suspect that policymakers will tighten policy sooner and faster than they project,” Capital Economics said of the Norwegian central bank.
“Looking ahead, we expect the NOK to rise against its Swedish cousin this year, helped by a combination of expected gains in oil prices and diverging monetary policy positions,” it added.
Others see rising infection rates leading to higher unemployment and weaker growth, crimping prospects for a stronger Norwegian crown.
SWEDISH CENTRAL BANK ON HOLD
Sweden’s currency was also expected to firm on stronger fundamentals, with the economy seen expanding around 3.7% after a slow start to the year.
Unlike Norway, the central bank is not seen tightening its monetary policy stance significantly, with the benchmark rate expected to remain at 0% for the foreseeable future.
“But the Riksbank is not as dovish than the European Central Bank, at any rate,” said Anders Eklof, analyst at Swedbank, said. “If I understand it right, the Riksbank will end its bond buying at the end of the year … and the ECB may continue next year.”
Eklof said he expected any strengthening of the crown to be limited.
“It’s not the case that the Riksbank is close to changing direction and starting to talk about rate hikes,” he said.
By this time next year, Sweden’s crown was predicted to strengthen to 9.88 to the euro from 10.23 now, the median forecast showed.
Meanwhile, the Norwegian crown was seen trading at 9.80 to the euro one year from now, against around 10.00 at present.
(For other stories from the latest Reuters foreign exchange poll:)
(Reporting by Terje Solsvik in Oslo and Simon Johnson in Stockohlm; polling by Manjul Paul and Mumal Rathore in Bengaluru; Editing by Bernadette Baum)
