The Nordic currency markets provide an interesting alternative for global investors. Although the countries share history and a common ground for how society should be run, the currency arrangements are different.
Norway is outside of the EU with a fully floating currency, the economy is heavy reliant on the petroleum industry. The NOK trades correlated to the oil price although the arrangement with the sovereign wealth fund (“petroleum fund”) should make for a lower correlation as all oil revenues are invested abroad.
Sweden is a member of the EU and with a fully floating currency. The Swedish economy is a European dependent export-heavy economy with a traditional manufacturing base although the IT and Services industries are steadily taking over as the engine of growth. SEK used to be a very procyclical currency but the strong balance sheet speaks for a lower overall correlation to global growth. The fact that SEK was the best performing G10 currency in 2020 when global growth had the worst development since WWII proves this point with clarity.
Denmark is also a member of the EU but with a pegged currency to the EUR. Having a fixed rather than a floating currency has served the country well, especially so in the context of the global disinflation haunting central banks with an inflation target. In the past 10 years Denmark has succeeded in combining a stable currency with low inflation and a remaining and sizable Current account surplus. Liquidity is strong although periods of weaker turnover can be noted during holidays. In the triannual BIS survey Scandies are found just outside the top 10 most tradable currencies with an approx. 2% share each of the global FX market turnover of USD 6000bn/day.
Cross Scandies, NOK/SEK is a popular currency pair speculative trading as it is a relatively market neutral.
Navigating you through the Scandies