Today, the Swedish newspaper Svenska Dagbladet published yet another article (in Swedish) on the theme that the krona is too strong, which hurts the Swedish export industry and therefore the Riksbank should cut rates and Sweden should even consider joining the currency union. In our view, it is tiresome and uninformed.
From a fundamental viewpoint it is hard to argue that the krona is too strong given, for example, the significant current account surplus, relative inflation developments, real interest rates, relative productivity gains, and solid public finances.
These long-term factors suggest that the krona is fundamentally undervalued, which we have taken into account in our medium-term SEK forecasts.
Taking inflation differentials into account suggests that EUR/SEK long-term equilibrium is in the neighbourhood of 8.30-8.40.
While the krona may potentially still face some short-term headwinds, depending on how hard data in Sweden unfold in the coming weeks, we think current levels offer attractive SEK-buying opportunities for long-term players.
To Read the Entire Report Please Click on the pdf File Below.
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Is The Swedish Krona Really Too Strong?
Published 11/06/2013, 05:04 AM
Updated 05/14/2017, 06:45 AM
Is The Swedish Krona Really Too Strong?
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