(Reuters) - Backed by solid economies, healthy fiscal positions and rising interest rates, Nordic currencies stand to gain as an exodus from the dollar pushes many major currencies into expensive territory. Debt crises in the United States and the euro zone have highlighted the fiscal stability of Sweden and Norway which, along with traditional safe haven Switzerland, rank among the lowest countries in terms of costs to insure against sovereign default. The Swiss franc and the yen, also considered a safe-haven currency, have gained sharply versus the dollar. But risks of weakening intervention by Japan is seen keeping a lid on further gains in the yen, while the Swiss National Bank checked the pace of the franc's appreciation by cutting interest rates on Wednesday. Analysts say that if such concerns limit gains in those currencies, the more growth-linked Swedish and Norwegian crowns stand to appreciate, particularly if extreme risk aversion subsides. "There's definitely a case for increased safe-haven flows into the Scandies but we think this will only happen in a moderate risk environment," said Kasper Kirkegaard, currency strategist at Danske in Copenhagen. The two Nordic currencies have outperformed the dollar since the start of the year, but against the euro -- the currency which sees the vast majority of flows versus the Nordics -- the Norwegian crown has gained only slightly this year, while its Swedish counterpart is in the red. On Wednesday, the euro traded at around 9.07 Swedish crowns and at 7.66 to the Norwegian currency. Many analysts expect the Nordics to gain against the euro and the dollar through year-end, and argue both have more room to rise compared with other growth-linked currencies like the Australian and New Zealand dollars. Danske says the Aussie is overvalued by around 30 percent, while the latest IMM data shows net long positions in the Aussie and kiwi -- or bets those currencies will rise more -- are approaching their highest in a year or more, possibly priming them for a correction. Net short positions in euro/Swedish crown have been receding in past weeks, while euro/Norwegian crown positioning is flat, according to SEB, one of few banks which gauges positioning in Nordic currencies, via proxies, in the absence of official data. This suggests ample room for these currencies to rise. LOW CDS, RISING RATES Some analysts argue that a growing market focus on a country's fiscal health should highlight the appeal of Nordic currencies. The benchmark five-year credit default swap for Norway hovers around 31 basis points, making it the country with the lowest cost to insure against default, according to Markit, undercutting Switzerland's 36 basis points. Sweden's CDS is around 44 points, lower than the 58 of Australia and New Zealand's 70, and a fraction of that of euro zone countries lined up for or at risk of needing bailout funds. Both currencies should also benefit from rising interest rates in Sweden and Norway, from 2.0 percent and 2.25 percent respectively, as both economies continue outperforming most of their developed counterparts. Sweden's Riksbank has raised rates at a constant pace this year and some analysts expect a climb to 3.5 percent by December 2012. Norway's Norges Bank is widely expected to continue on its tightening path, with a rise this month seen likely. Meanwhile, the Reserve Bank of Australia may keep rates on hold in coming months, having already raised the cash rate to 4.75 percent -- the highest in the industrialised world. "You used to have the RBA raising rates but they have slowed so what you have left now are the Riks and the Norges," said Richard Falkenhall, currency strategist at SEB in Stockholm, adding that investors have been slow to price in more rate rises into the Swedish crown in particular. SEB expects the euro to slip to 8.80 Swedish crowns and 7.7 Norwegian crowns by year-end. Nordic banks say that in the past six to 12 months they have seen signs of increasing demand, particularly for the Swedish crown, from overseas real money participants, who are often long-term investors. Custodial flows in the Swedish crown seen by Bank of New York Mellon indicate net holdings in the currency have been stable since May, after climbing in April when concerns escalated regarding a second debt bailout package for Greece. Noting that purchases of Swedish debt have picked up modestly in the past week, BNYM currency strategist Neil Mellor said the data suggests that SEK demand has been constant despite a ramp-up in risk aversion in past months. "Cumulative holdings in SEK have been on a rising trend since April," he said. "That supports the view that it is being seen as a safe haven, or a safer haven at least." But he and other analysts highlighted the perennial Nordic bugbear -- limited liquidity in Scandinavian markets will keep the Swedish and Norwegian crowns vulnerable to selling if risk appetite sours. "Why wouldn't you buy SEK?" Mellor said. "But would you put all of your money into it, knowing it is illiquid? Of course you wouldn't." (Reporting by Naomi Tajitsu; Editing by John Stonestreet)

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