Wednesday, 29 June 2011
When the Swedish economy started gaining strength at the aftermath of the financial crisis, Sweden made some Skr8.1 billion in gains that reduced its nation debt. This came from the state using instrument in the international currency market – similar to the ones that banks used to bring the world to it knees during the recent financial crisis.
The Swedish Debt Office's speculation that the exchange rate of the Krona would strengthen against the euro is what paid dividend. For the past 20 years, the debt office has made Skr20 billion in currency speculation for the tax payers.
The Debt Office, which among other things handles government borrowing, closed a record high position for the Swedish currency worth Skr50 billion. The result was a profit of 8.1 billion. The position was built up during the financial crisis in January 2009 when the euro then cost more than Skr11.50. The gains began in September last year when the euro cost Skr9.30.
Lundgren has previously said that a euro rate would dangle between of Skr9.00 to skr9.30 should be considered to be normal. The settlement has taken place gradually so as not to influence the currency market too much. In practical terms, the Debt Office has borrowed in euros instead of dollars.
"The profit is due to that the Krona, as we expected, has strengthened significantly. So we have had to pay back a smaller amount than we need to do if the debt has been left in the Krona, "the National Debt Office said in a statement.
The head of the organisation, Lundgren is satisfied. "Our goal is to borrow as cheaply as possible without taking too much risk. To reach that goal, we must be active in the management of government debt. We are continuing to observe how the interest and exchange rates evolve and try to take advantage of the opportunities that arise, "he said in a statement.
Exposure was built at an average price of €10.70 and settled at an average price of around €9.
The Debt Office has a good history in terms of active positions in the foreign exchange market. In May 2009, the head of portfolio management of the currency, Bengt R�dstam, told the Swedish Business daily, Dagens Industri that the average gain per year was 700 million since 1992. By then, the Debt Office had recently announced that it closed a position that the Krona would strengthen against the euro, which gave Skr2.5 billion in profit.
Added that o the current success, means that the Debt Office has made a profit of about Skr20 billion in the last 20 years.
"In the current management, we work along and put our faith in the international currency market and take positions in derivative instruments. The instruments used are interest rate futures, interest rate options, swaps, forward exchange contracts and currency options. Permitted currencies are the euro, U.S. dollars, Australian dollars, Canadian dollars, Japanese yen, British pound, Swiss franc and Norwegian krone, "the Debt Office wrote on its website.
With all this money gained, it shows that Sweden is very strong casino and such benefits of great wealth has transformed the Swedish streets – all paved with gold.
By Scancomark.se Team