OSLO (Reuters – In the next 12 months the Swedish and Norwegian currencies are expected to gain ground against the euro, possibly hitting multi-year highs in a period of strong economic recovery for the Nordic region. This is according to a Reuters poll.

Sweden and Norway both recently removed almost all restrictions socially. The result was a significant uptake in COVID-19 and an associated drop in infection rates, which allowed businesses to flourish.

The currencies, which plunged last year when the coronavirus struck, have since recovered and trade slightly better against the euro that their pre-pandemic level. However, they are expected to continue rising, although the potential scope for gains will be smaller, according to the poll.

Norway’s crown rose by about 6% in August, to trade at approximately 9.94 euro against the euro. The poll indicated that it could reach 9.83 this year. This would be the highest point since January 2020.

Analysts attribute the crown’s lift in recent weeks to hawkish monetary policy and a surge in the price of Norway’s oil and gas https://www.reuters.com/business/energy/fossil-fuel-demand-shakes-off-pandemic-blow-climate-fight-2021-10-04 exports.

Norges Bank last month raised rates https://www.reuters.com/world/europe/norway-raises-interest-rates-says-another-hike-likely-december-2021-09-23 for the first time since 2019 and plans four more hikes over the coming 15 months, with the next tightening pencilled in for December.

The often volatile Norwegian currency, however, is at high risk for periods of depreciation and will be forecasted to fall below its current level by 2021. It then rises again in the next year.

Nordea Markets warned that NOK was not a safe haven during troubled times, and it could be affected by sentiment changes in the markets.

The poll revealed that Sweden’s currency is likely to weaken slightly in comparison to the euro over the next 12 months. However, it will continue to rise and reach its highest level since 2018 early 2018.

Riksbank’s benchmark repo rate has remained at 0%, and it expects to maintain that level for many more years, despite strong economic recovery.

However, some economists believe that the recovery in the Swedish economy is an opportunity for central banks to modify their monetary policies in 2022.

Capital Economics stated that the stars were aligning behind its view that next year, policymakers will allow the balance to contract. This was in a recent note to clients.

The median forecast for Reuters showed that the average prediction was that the Swedish currency would see gains of approximately 2.5% against euro, to trade at about 9.92 next year.

(For additional stories, see the October Reuters foreign-exchange poll: