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Norwegian Krone to Weaken to Parity Against Swedish Krona, BofA Forecasts
Bank of America analysts forecast the Norwegian krone will weaken to parity against the Swedish krona by the end of 2026, citing diverging domestic economic outlooks and a less favorable energy price environment for Norway. In a note to clients, the bank projected the NOK/SEK cross rate will fall further to 0.95 during 2027.
Contrasting Economic Trajectories
BofA's outlook is underpinned by differing economic conditions in the two Scandinavian nations. The bank sees several domestic factors favoring the Swedish krona, including resilient European economic activity, rising defense-related investment, and faster domestic demand growth. Analysts also noted that the Riksbank's response to previous krona weakness provides additional support for the currency.
In contrast, Norway's economy is facing headwinds from slowing economic activity. The bank attributes this to moderating real-wage growth and the impact of high interest rates, which are creating challenges for the Norwegian krone.
Energy Prices and Central Bank Policy
AdA key driver of the forecast is the expectation that energy prices will trade below current futures contracts through 2027, removing a significant pillar of support for the Norwegian krone. However, the bank noted that short-term winter risks to European gas prices could provide temporary support for the currency and postpone the expected decline.
On monetary policy, BofA expects Norges Bank to maintain its current interest rates until mid-2027. It then forecasts the central bank will begin a cutting cycle in September 2027, with three quarterly reductions bringing Norway’s policy rate to 3.75% by early 2028 as growth slows.
Valuation Perspective
According to Bank of America's fair-value models, the Swedish krona currently ranks as the second-cheapest currency in the G10, while the Norwegian krone appears among the most expensive. While analysts stated that current valuations are not extreme enough to trigger an immediate reversal, they support the medium-term view of Norwegian krone depreciation against its Swedish counterpart.
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