OSLO/STOCKHOLM: The currencies of Norway and Sweden are set to extend their recent gains against the euro and dollar in 2021 as the Nordic region's economic prospects continue to recover, a Reuters poll of analysts showed. Both the Swedish and Norwegian crowns plunged in March as the first wave of the Covid-19 pandemic swept the region, but have since seen a gradual normalisation of exchange rates.
In Norway, which is expected to see the biggest currency bounce, the central bank has said it may raise interest rates in early 2022, potentially making it the first developed economy to increase the cost of borrowing after the pandemic.
A sharp rebound in the price of crude oil, Norway's top export, will also push up the currency, analysts said.
"The Norwegian crown hasn't recovered as much as the Swedish crown has, so it has more to gain," Nordea Markets Chief Analyst Niels Christensen said.
"The economic situation is better for the Norwegian crown as Norway has been able to really control the spread of coronavirus and it has more ammunition due to the oil fund, so they are in a stronger position," he said.
Norway's crown tumbled to all-time lows in mid-March but began to recover when the central bank said it could intervene in the market for the first time in two decades and as oil prices rose.
Meanwhile, the Swedish crown has fully recovered from 11-year lows against the euro and 18-year lows against the dollar in March.
Home to brands such as truck maker Volvo and mobile networks producer Ericsson, export-oriented Sweden is also a major attraction for investors seeking to benefit from a rebound in economic growth.
"It looks encouraging for the Swedish crown. The big mover for it is positive sentiment on global equity markets which most people expect to continue to do well," Nordea's Christensen said.
Forecasts for both the Swedish and the Norwegian crown currencies have been lifted since last month, the poll showed.
By this time next year, Sweden's crown is predicted to strengthen to what would be close to a four-year high of 9.90 to the euro from 10.06 now, the median forecast showed. A similar poll in December had forecast a rate of 9.96. Meanwhile, the Norwegian crown is seen trading at 10.10 to the euro one year from now, up from 10.34 now and 23% above the all-time low of 13.17 set on March 19. The early December poll had predicted 10.20.