Swedish krona weakens while Norwegian krone gains strength amid rate gap

The Swedish krona has depreciated more than any other G10 currency this year, while the Norwegian krone has outperformed its peers. Olav Chen, senior portfolio manager at Storebrand Asset Management, explains that the divergence stems from Norway’s tighter monetary stance compared with Sweden’s more accommodative policy, reflecting stronger Norwegian economic growth and higher wages. He adds that Sweden’s economy has lagged, with weaker household finances and lower inflation, prompting the Riksbank to keep rates low for now.

High energy prices have increased foreign earnings for Norwegian oil and gas companies, raising demand for the krone. Chen cautions that the Swedish central bank may need to raise rates in the future, and he predicts another Norwegian rate hike at the upcoming policy meeting. The currency moves, he says, are closely linked to inflation dynamics and import costs in both countries.