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Long Term Support for Swedish Krona

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Following a month long plunge against the dollar, investors, along with Sweden's central bank official, anticipate an imminent rebound for the Swedish krona versus the USD. The Swedish currency plunged in late October as the Riksbank dampened investors' expectations for further hikes in the interest rates. The currency dropped from 6.48 versus the dollar to currently trade at 7.05.

Recent economic data, however, brought back expectations of a sooner than expected rise in interest rates, signaling that Sweden's economy will expand and interest rates will rise faster than in the U.S. or Europe. Recent data showed that consumer and business confidence is soaring with recent GDP data supporting the optimism. Swedish government's statistics agency said third-quarter gross domestic product expanded by a seasonally-adjusted 2.1% on a quarterly basis and grew 6.9% on an annual basis.

The fundamentals provide strong support for the Swedish krona with the expectation of an interest rate hike in February; however, the recent GDP data and comments by Swedish officials in support of a stronger domestic currency have raised expectations of an interest rate increase as soon as December.

The main obstacle facing the krona is the persistent euro-zone debt crisis as the region accounts for over 60% of its exports and therefore makes is vulnerable to any issues arising from the region. The currency is also very sensitive to overall market mood which is again extremely dampened over the euro-zone crisis, dragging down the krona's sentiment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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