The currencies of Sweden and Norway will make modest gains against the euro in the year ahead buoyed by robust economies and tighter monetary policy than that on the continent, a Reuters poll showed. Sweden and Norway have been growing faster than the euro zone, but the two economies have slowed as depressed demand from recession-hit Europe has weighed on exports.
The possibility of rate cuts has taken some of the shine off the two Nordic currencies, which had been rising steadily against the euro since the start of 2009. Norway's crown has also been hit by a weaker outlook for oil prices. But stronger economic fundamentals in AAA-rated Sweden and Norway and a desire by their central banks to keep policy tight in the face of high levels of household debt will support the currencies in the medium term, the poll showed.
"Sweden is a stable economy with growth, and this will feed through to the euro-stockie in, say, one year's time," Nordea analyst Torbjorn Isaksson said. "We see euro-stockie at 8.20 mid-next year." The Swedish central bank said at its last meeting in April that it expected rates to start rising in the second half of 2014, though analysts see a risk of a rate cut as early as July when the Riksbank next meets. Analysts in the poll saw the Swedish crown at 8.54 against the euro in one month and 8.33 in 12 months time. The crown was seen at 6.60 against the dollar in a month and 6.82 in a year.
The Norwegian crown was seen at 7.53 in a month against the euro and 7.36 in a year's time. Versus the greenback it was seen at 5.82 in a month and slipping slightly to 5.94 in a year. Norway's central bank holds its next rate meeting on June 20 and most analysts expect the bank to keep rates steady at 1.5 percent, though there is a slim chance of a rate cut.
"We expect that the crown will gradually strengthen against the euro over the next year, despite a lower rate of growth in Norway, because the relative economic development of Norway and the euro zone is still in the crown's favour," Nils Kristian Knudsen, Currency Strategist at Handelsbanken, said.
While Statistics Norway recently cut its forecast for economic growth, the economy is expected to expand by 2.5 percent this year and 3.0 percent in 2014. Sweden is expected to grow 1.4 percent in 2013 and 2.7 percent next year. The euro zone economy, which contracted for the sixth straight quarter in the first three months of the year, is expected to shrink 0.5 percent this year before returning to growth in 2014.
The Swedish crown was trading at around 8.60 versus the euro on Wednesday and 6.58 versus the dollar. The Norwegian crown was around 7.60 and 5.8 respectively. In the last poll, conducted in March, analysts had forecast the Swedish crown at 8.40 to the euro and 6.42 versus the dollar three months ahead. The Norwegian crown was forecast to be 7.35 to the euro and 5.62.