The currencies of Sweden and Norway will make large gains against the dollar over the next 12 months and more moderate advances when compared to the euro, according to recent Reuters poll forecast. Both countries' central banks raised key policy interest rates last year for the first time since 2011. They plan to do so again later this year, although recent global economic uncertainty may temper the urge to hike.
Both the Swedish and Norwegian crowns underperformed expectations in 2018, weakening against the bigger global currencies amid trade tensions after analysts predicted a year ago they would rise. Norway has seen its currency fall sharply against the euro in recent months, in step with the declining price of crude oil, the country's main export. But that may be about to change, brokers at Danske Bank said.
The Norwegian economy should sustain above-trend growth due to high oil and infrastructure investments, as well as rising wages, while prospects for more expensive crude and hikes in interest rates will drive the crown, they added. "We expect the krone to strengthen significantly in 2019," Danske concluded on Jan. 4, predicting a 7 percent rally to 9.10 crowns per euro by the end of the year.
The Swedish crown has already strengthened during the autumn, and analysts thus see smaller gains ahead compared to those of its neighbour. Sweden's general election in September delivered a hung parliament and no clear path to the formation of a viable government. While political turmoil has yet to impact the economy, Sweden may face a snap election in April, Danske said.
The poll predicted Norway's currency will strengthen 4.8 percent in the next 12 months to 9.30 against the euro, while Sweden's crown will strengthen 3.2 percent to 9.90, the Reuters poll of nearly 40 economists predicted. Against the dollar, the Norwegian crown is expected to strengthen 9.1 percent to 7.75 in the next 12 months, while the Swedish currency is expected to rise 7.8 percent to 8.23.
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