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POLL-Swedish, Norwegian crown gains vs euro limited

Published 02/02/2011, 09:45 AM
Updated 02/02/2011, 09:48 AM

By Wojciech Moskwa and Walter Gibbs

OSLO, Feb 2 (Reuters) - The buoyant Norwegian and Swedish crowns are expected to appreciate more slowly against the euro over the next 12 months and fall back against a resurgent dollar, a Reuters poll of analysts shows.

Both currencies will be driven higher by accelerating economies and interest rate hikes at a time when the euro zone remains mired in debt troubles.

The Swedish crown has hit 10-year highs to the euro while the Norwegian unit flirted with three-year highs against the euro last month before trailing off a bit over the last three weeks.

"The dynamic is much the same in both cases -- it's the relative growth prospects that count," said Maren Romstad, a currency analyst at DnB NOR Markets in Oslo.

As fiscal tightening weighs on near-term prospects in the euro zone the U.S. economy looks set for a pick-up in growth that would give the dollar an additional lift, she said.

"It's important to remember that both the Norwegian and Swedish crowns are already fairly strong, so many see limited potential for further strengthening," Romstad said.

According to the median forecast from a Reuters poll of around 40 analysts, the Swedish crown is seen weakening to 8.85 against the euro in one month, then strengthening to 8.80 in three months and to 8.75 in 12 months.

That corresponds to a around a 1 percent rise in the next year from Wednesday's 8.866 level.

SWEDEN "RELAXED" ON CROWN

Against the dollar, the Swedish crown is seen at 6.50 in one month, 6.61 in three, 6.65 in six and 6.52 in 12 months' time -- or weakening by about 3.5 percent from the current level of 6.403.

On Tuesday, Sweden's Finance Minister Anders Borg signalled that the exchange rate was not a problem for Sweden's economy -- set to be Europe's top performer in terms of economic growth rates again in 2011.

"We've had long periods with the crown stronger than now and at the same time very high growth, for example in the nineties when the crown strengthened a lot, and we at the same time had very high growth numbers," Borg told Reuters. "I have a very relaxed attitude towards this," he said.

The Norwegian currency is seen firming to 7.85 against the euro in one month, 7.80 in three months, 7.73 in six months and 7.65 in 12 months compared to Wednesday's 7.90 level. To the dollar it was seen weakening to 5.84 in six months before returning roughly to Wednesday's level of 5.70 in 12 months.

This view of limited further upside for the "Nokkie" would surely be welcomed by Norway's central bank, which has said further currency appreciation could affect inflation and the bank's proposed interest rate path.

"We have noted that the crown has strengthened somewhat, and to the extent that it strengthens further it will be a concern, especially via low price impulses that affect rate-setting," Norges Bank chief Oeystein Olsen said last week. (Editing by Susan Fenton)

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