UBS raises EUR/SEK price target on low-yielding krona concerns

UBS has raised its forecasts for EUR/SEK, citing the Swedish krona's relatively low-yielding profile as a key constraint even as Sweden's domestic economic backdrop improves. The bank now expects EUR/SEK to trade around 11.00 by December, compared with its previous forecast of 10.50. UBS also lifted its March 2027 target to 10.90 from 10.40 and its June 2027 forecast to 10.70 from 10.30. The bank added a September 2027 target of 10.60. ## Low yields remain a challenge for the Swedish krona UBS believes the krona's low interest-rate carry remains one of the biggest obstacles to sustained appreciation. In foreign exchange markets, currencies with higher yields can attract more capital because investors receive greater returns from holding them. Lower-yielding currencies such as the Swedish krona can therefore struggle when global investors continue to favor higher-return alternatives. The bank expects Sweden's Riksbank to keep interest rates unchanged for now, limiting the potential for a meaningful improvement in the krona's relative yield advantage. ## ECB rate outlook could keep EUR/SEK elevated UBS expects the European Central Bank to raise interest rates in September. If the ECB tightens policy while the Riksbank remains on hold, the euro could retain an interest-rate advantage over the Swedish krona. That difference in expected monetary policy is one reason UBS has raised its EUR/SEK targets despite signs of stronger Swedish economic fundamentals. A more favorable environment for the krona would likely require markets to fully remove expectations for additional Federal Reserve rate hikes. Lower U.S. rate expectations could reduce demand for higher-yielding currencies and provide some relief to lower-yielding currencies such as the Swedish krona. ## Swedish fundamentals remain relatively supportive Although UBS is more cautious on the krona's near-term performance, Sweden's domestic fundamentals have improved. Better economic conditions could provide some underlying support to the currency, but the bank believes yield considerations remain more influential in the current global FX environment. As a result, stronger Swedish fundamentals may not be enough on their own to push EUR/SEK significantly lower in the near term. ## Norwegian krone outlook remains stronger UBS maintained its existing forecasts for the Norwegian krone through June 2027 and added a September 2027 forecast at similar levels. The bank continues to view the Norwegian krone more favorably because it offers one of the more attractive carry profiles among G10 currencies. Norway also benefits from a relatively hawkish central bank and its position as a major net energy exporter. These factors can help support the krone when investors seek currencies with stronger yield characteristics and exposure to commodity revenues. ## Norges Bank could raise rates again UBS expects Norges Bank to deliver one more interest-rate increase. The ECB is also expected to raise rates, which means the interest-rate differential between Norway and the euro area may remain relatively stable. This supports UBS's view that the Norwegian krone can remain more resilient than the Swedish krona even if both currencies face broader global market pressures. ## Key levels and forecasts to watch For EUR/SEK, UBS now forecasts 11.00 for December, 10.90 for March 2027, 10.70 for June 2027 and 10.60 for September 2027. For the Norwegian krone, the bank maintained its previous projections near 10.70, 10.60 and 10.50 through the first half of 2027, while adding a September 2027 forecast around 10.50. These forecasts suggest UBS expects gradual improvement in Scandinavian currencies over the longer term, but with the Swedish krona facing greater near-term pressure because of its weaker carry profile. ## What could change the outlook The future direction of EUR/SEK will depend heavily on monetary policy expectations across Sweden, the euro area and the United States. A more hawkish Riksbank, a more dovish ECB or a significant decline in U.S. rate expectations could strengthen the Swedish krona. For the Norwegian krone, oil prices, Norges Bank policy and global risk sentiment remain important drivers. For now, UBS sees the Norwegian krone as better supported than the Swedish krona because of its stronger yield advantage and exposure to energy exports.