On August 14, Nordea published separate currency assessments on Sweden and Norway, painting a cautious near-term outlook for both Scandinavian currencies. The Swedish krona remains undervalued against major currencies, but its potential for significant appreciation is limited, according to Nordea's strategists. Valuation models indicate that the SEK is trading below levels implied by purchasing power parity and other long-term equilibrium measures following a sharp weakening since 2021.
Nordea points to several structural and cyclical factors constraining the krona. Relatively high global interest rates, especially in the United States, continue to support the dollar and other higher-yielding currencies. Sweden's central bank, the Riksbank, has signaled possible rate cuts but remains cautious, leaving timing uncertain. Domestic conditions are also fragile: inflation is still above target, household consumption is under pressure, and the housing market remains sluggish. Because the krona is a smaller and less liquid currency, it is more vulnerable to shifts in global risk sentiment, with investors often favoring safe-haven assets during periods of market stress.
Nordea suggests that any appreciation in the Swedish krona is likely to be modest and gradual rather than a sharp re-rating. Importers may benefit from the weaker currency, while exporters could retain a competitive edge. Households and businesses with foreign currency debt may continue to face headwinds. The bank aligns with a broader Nordic consensus that the SEK will remain range-bound in the near term, with slow appreciation possible once global rate cuts materialize and Swedish domestic conditions improve.
For Norway, Nordea forecasts that the Norwegian krone will remain range-bound against the euro in the near term but strengthen by 2027. The outlook is supported by expectations that Norges Bank may keep interest rates higher for longer than the European Central Bank, which could attract capital inflows and support the NOK. Norway's role as a major oil and gas exporter means stable or rising energy prices could also benefit the currency, while the country's sovereign wealth fund provides long-term fundamental underpinning. Businesses trading with the eurozone could see cheaper imports if the krone appreciates, though export competitiveness may weaken. Investors holding NOK may benefit over the medium term.
