The Swedish economic growth brings in worrying currency pain as the Krona remain troublingly strong


Saturday, 18 June 2011
The Swedish krona which has strengthened as a result of the buoyant Swedish economic growth is looking like a thorn in the flesh of the Swedish producers at the moment. The reason is that it seems to be hurting the Swedish exports as their products become more expensive abroad.

Macro economic analysts feel that the big rise is reaching its limits and would either remain steady at a new height or will fall marginally to a higher but manageable height. The backdrop cames when the Krona was seen to have further strengthened a bit against the euro but weakened against the dollar on Friday.

As the Swedish economy recovered from the recent deep recession, the country’s currency, the krona, has made a phenomenal comeback – rising as if propelled with a mix of helium -type gasses.
Against both the euro and dollar, the exchanges rate in two years has strengthened by about 15 percent to €9.15 and $6.40 respectively.


Sweden’s impressive state finances and growth rates relative to most other western countries, coupled with a Governor who resolutely announces new interest rate hikes, has increased the status of the Krona significantly.
Swedish foreign travellers are enjoying their new-found purchasing power, while exporters were gnashing teeth.

Jan H�ggstr�m, chief economist at Handelsbanken, believe that the Krona in principle, have risen ready.
"The krona will not be so much stronger, trade-weighted. The Krown strengthened slightly against the euro to a range between €8.60 and $9.10. On the other hand, I think the dollar will be strengthened quite a bit against the euro. This means U.S. dollar strengthening against the Krona in one year to about Skr7.50, "says Jan H�ggstr�m.

"The forecast is based on the perception of a stronger U.S. growth relative to Europe, "he continues.

For others such as Cecilia Skingsley, chief analyst at Swedbank, she tracks one year ahead and sees a rate of around Skr9 to the euro of a range of 8.90 to 9.10.
But she sees a less sharp dollar appreciation and trace Skr6.70 to the dollar in a year’s period.
"And the risk spectrum is well that the dollar appreciation has not been reached, "said Cecilia Skingsley.

Marie Giertz, chief economist at L�nsf�rs�kringar, agrees.
"The journey up is already done. Against the euro, is the Krona remained at current levels or slightly stronger in one year and the dollar would stand at about Skr 6.70 in one year ahead, "she says.
By Team

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