CHF, NOK to appreciate over the next year - Reuters poll

Reuters is out with a poll result that says participants are expecting the Swiss Franc and Norweigan Krone to gain on the US Dollar this year.

Key quotes (source: Reuters)

The two Nordic currencies sharply underperformed in 2017 amid worries that house prices could collapse, despite predictions at the start of last year of Nordic currency strength.

The outlook for 2018 is nevertheless more positive, and the central banks of Norway and Sweden plan to begin a gradual tightening of monetary policy after years of ultra-cheap cash, which may also contribute to currency strength.

While Sweden’s Riksbank has so far signaled a rate hike in the first quarter of 2019, it may move this to the last quarter of 2018, SEB’s chief foreign exchange strategist Carl Hammer said.

“We expect a high March inflation (figure) and that will be the first trigger for a stronger (Swedish) crown,” he said, while cautioning the currency’s upside potential would be limited as long as the central bank keeps a negative repo rate.

The more hawkish Norwegian stance has strengthened its currency against the Swedish crown by some 8 percent since the start of 2018, although the Reuters poll suggested this gap would be partially reversed in the coming year.

Overall, economists predicted the Swedish crown will gain 10 percent from current levels against the dollar and 6.5 percent against the euro EURSEK= by the same time next year.

The Norwegian crown was meanwhile set to rise by 7.4 percent against the dollar and 4 percent against the euro EURNOK= over the next 12 months.

“The Norwegian crown is unreasonably undervalued, when you consider the outlook for the Norwegian economy and rising interest rates,” DNB Chief Economist Kjersti Haugland said.