Why is the krona suddenly doing so well?
There are several economic reasons, such as an expected upswing in the Swedish economy, Sweden’s stable public finances, and increased interest in our defence industry among investors in a Europe that is gearing up. Additionally, the ECB is likely to continue lowering the key interest rate to become lower than the Swedish one, and economic data in the US points to a cooler economy. The krona's strengthening is probably also due to speculative factors. Once the krona strengthens, it attracts investors who follow the trend and don’t want to “miss the train,” says Amanda Sundström, currency strategist at SEB.
Smaller currencies are often said to suffer in times of turmoil – isn’t that true anymore?
Yes, what we are seeing is very unusual – and, indeed, market participants usually seek to move away from smaller currencies, such as the krona, in turbulent and uncertain times. Larger currencies, such as the US dollar, are considered safer. But right now, the pattern is essentially the opposite regarding the krona in relation to the dollar, says Robert Bergqvist, senior economist at SEB.
What does the stronger krona mean for the Swedish economy? How are individuals and companies affected?
When the krona's value strengthens, imports to Sweden become cheaper, creating lower inflationary pressure. This is welcome and good for Swedish consumers as, for example, imported goods become more affordable. It can also open the door for the Riksbank to lower the interest rate again. This is good for our mortgage rates. On the other hand, the krona's strength creates headwinds for our export industry as companies receive fewer kronor for each product sold. This is particularly concerning in a situation with ongoing trade wars and the risk of a declining global economy. In other words, there are both winners and losers when the krona strengthens, says Robert Bergqvist.
The krona has sometimes, somewhat disparagingly, been called a “floating currency” – is the Swedish currency now on its way to a long-term comeback?
It is probably too early to celebrate. Despite several drivers for the krona's strengthening, uncertainty is very high, and the tariff conflict likely has a negative impact on global growth. In the longer term, we still believe that Sweden's growth potential is better than Europe's and predict a gradual strengthening of the krona against the euro. Against the dollar, we also believe that the krona can continue to strengthen significantly, especially if growth prospects cool even more in the US.