Analysts predict Norway's krone could make up lost ground on the euro and US dollar

Bank HSBC believes the Norwegian krone is poised to recover some of its losses following a turbulent few years in which it has struggled against most major currencies.

“We believe the balance of risks is now shifting towards a recovery for the Norwegian krone,” Charlotte Ong, European currency strategist at HSBC, said.

She added that some of the factors that pushed the krone down in recent years had stabilised.

“Therefore, we believe that the potential for a recovery for the Norwegian krone should not be overlooked, and we expect the krone to rise [against the Swedish krona] in the coming months,” she said. 

Ivar Strompdal, a former fund manager, told the business and financial paper Dagens Næringsliv that the krone could pick up against the dollar and the euro in the coming years.

He said increased spending in Europe and the United States would give smaller currencies a chance to make a recovery.

“The foreign exchange market is the world's most efficient market. Trying to make quick profits there will quickly lead you down a wild path, and it is almost impossible to predict exchange rates for the near future. But in the longer term, I believe the Norwegian krone will strengthen,” Strompdal said.

Stompdal predicted that one euro could cost less than ten kroner in the next few years. However, he admitted that not many may agree with this outlook.

Interest rate and currency strategist Dane Cekov at Sparebank 1 Markets said he was sceptical about whether the krone could strengthen significantly against the euro this year.

“We see more downside for oil and gas prices in Europe, and that is negative for the krone. For the euro, however, lower gas prices are positive. The economic packages in the EU and Germany on defence and investments can kickstart better growth development in the euro area and provide less need for low interest rates there. Better development in Europe indicates a stronger euro and less downside possibility for the euro to fall over time,” he said.

Although he did say he could see the possibility of the Norwegian krone gaining ground on the US dollar.

“I also became more pessimistic about the krone after Trump won the US election. At the same time, we now see that Trump is doing more harm to the dollar than good with his policies,” Cekov said.

“This will probably continue. A further weakening of the dollar could help more risk-sensitive currencies, such as the krone. Other smaller currencies, such as the Swedish krona, are not as energy-dependent and will probably perform better,” he added.