Swedish crown expected to gain against euro

Sweden's crown currency will probably strengthen against the euro in 2016 despite a plan by the country's central bank to weaken it, and its gains are likely to be accompanied by a rally in the Norwegian crown, according to a Reuters poll. Sweden's consumer prices have been flat or falling for most of the last three years even though its economy is growing. A meagre pickup in prices towards the end of 2015 seems to have stalled, in part because of the crown's recent strength.
The central bank's board, which has slashed interest rates to a record low of minus 0.35 percent, earlier this week authorised its governor to intervene in the market to push down the crown in a bid to boost inflation.
But market strategists expect the crown, which has risen by about three percent against the euro since September, to gain another three percent in 2016 to reach 9.00 by the end of the year.
"Sweden is now among the top international performers in terms of economic growth, making the crown attractive," DNB Markets economist Camilla Viland said. "We believe the crown will remain so even though the central bank is clearly trying to limit the attraction by threatening to intervene."
DNB also predicted that Sweden's inflation rate will rise in 2016, reducing the need for a weaker currency, Viland said.
The currency of neighbouring Norway has weakened, falling around 13 percent to 9.65 against the euro since May as the price of crude oil, Norway's key export, continues to decline. But it is expected to rise by seven percent during the next 12 months to reach 8.95.
The Norwegian central bank, which itself has forecast a somewhat stronger crown, wants to avoid a surge that could hurt the economy at a vulnerable time and has said it is likely to cut rates in March.
Forecasts varied a great deal for both the Swedish and the Norwegian currencies, reflecting differing views among analysts on factors ranging from global growth and interest rates to the price of oil.
The most bearish predicted that both currencies will weaken by over three percent against the euro by the end of 2016. The most bullish expect rallies of around 11 percent.