Home HomeSwedenLivingWorld world_2_fill WorldBusiness BusinessSports sports-soccer SportsEntertainmentEntertain

Despite global stock market turmoil, the krona strengthens

The latest days' global stock market turmoil has not affected the Swedish krona negatively. The krona has instead strengthened – both against the dollar and the euro. This is a bit unusual. Normally, the krona weakens when the stock market falls, as the risk appetite to buy smaller currencies decreases, says Danske Bank's chief analyst Stefan Mellin.

» Updated: 08 August 2024, 14:10

» Published: 08 August 2024

Despite global stock market turmoil, the krona strengthens
Photo: Martina Holmberg / TT

One week ago, the dollar cost around 10.70 Swedish kronor. Since then, the krona has steadily strengthened.

On Monday afternoon, when the world's stock exchanges were in turmoil, the dollar cost around 10.50 kronor. After that, the krona has continued to strengthen slightly. One dollar costs 10.47 kronor at lunchtime on Thursday.

The Japanese central bank's lowering of the interest rate led to large movements in the US dollar. They sold dollars against everything, which benefited the krona and other currencies with relatively low interest rates, says Stefan Mellin, chief analyst at Danske Bank.

The same trend can be seen when it comes to the euro. One week ago, one euro cost around 11.55 kronor. By Thursday morning, it was down to 11.45 kronor.

The market has priced in a rate cut

The latest strengthening, however, comes from a weaker period in July where the krona weakened against both the dollar and the euro.

This was partly due to our lower inflation, but also because the Swedish Central Bank had a clearly softer tone regarding future interest rate cuts than the ECB had, says Stefan Mellin.

Does this mean we can expect the krona to fall again if we get an interest rate cut in August?

Not necessarily. The market has already priced in a rate cut from the Swedish Central Bank. If a 50-point cut were to happen instead of 25, it might have some effect, but much depends on the signals they give in their communication ahead of the decision.

No optimal exchange rate

What is then an optimal exchange rate for the krona? It depends on who you ask. Swedish export companies benefit from a weak krona, while summer vacationing Swedes probably dream of going back to ten years ago when one euro cost around 9.20 kronor.

Over the past ten years, we have had an expansive monetary policy that was clearly more extreme than other central banks, even with negative interest rates. But it benefited, for example, mortgage borrowers.

In the slightly longer term, however, Stefan Mellin and Danske Bank predict that the krona will weaken.

We expect it to be back at 11.70 against the euro in six months, partly because the Swedish Central Bank will likely move faster with interest rate cuts than the ECB. But if the stock market turns upwards soon, the krona can absolutely strengthen by another 20 öre against the euro.

Tags
TTT
By TTThis article has been altered and translated by Sweden Herald

More news

Astra Zeneca's China Chief Arrested by Police
1 MIN READ

Astra Zeneca's China Chief Arrested by Police

More rate cuts - but risk of turmoil with Trump
2 MIN READ

More rate cuts - but risk of turmoil with Trump

Svantesson: Trump Politics May Increase Inflation
1 MIN READ

Svantesson: Trump Politics May Increase Inflation

Major Banks Lower Mortgage Rates
1 MIN READ

Major Banks Lower Mortgage Rates

Central Bank Economist: Central Bank Cuts Interest Rate Too Late
2 MIN READ

Central Bank Economist: Central Bank Cuts Interest Rate Too Late

How You Are Affected by Lowered Interest Rates
2 MIN READ

How You Are Affected by Lowered Interest Rates

Thedéen expects turmoil after Trump's victory
2 MIN READ

Thedéen expects turmoil after Trump's victory

Inflation upswing does not threaten interest rate cuts
3 MIN READ

Inflation upswing does not threaten interest rate cuts

Stockholm Stock Exchange rises after interest rate cut
1 MIN READ

Stockholm Stock Exchange rises after interest rate cut

Most up on Asian stock exchanges
1 MIN READ

Most up on Asian stock exchanges

This is how your wallet can be affected by Trump's victory
2 MIN READ

This is how your wallet can be affected by Trump's victory

Cheerful on Wall Street after Trump win
1 MIN READ

Cheerful on Wall Street after Trump win

Thousand-kronor notes to be picked up when the Central Bank increases the pace
3 MIN READ

Thousand-kronor notes to be picked up when the Central Bank increases the pace

Swish up and running again after disruption
1 MIN READ

Swish up and running again after disruption

Trump's company is soaring on the stock exchange
1 MIN READ

Trump's company is soaring on the stock exchange

Swedish Export Threatened by Trump Victory
2 MIN READ

Swedish Export Threatened by Trump Victory

Sameby's appeal against mining company rejected
1 MIN READ

Sameby's appeal against mining company rejected

Inflation Expectations Fall
1 MIN READ

Inflation Expectations Fall

Better than expected for Novo Nordisk
1 MIN READ

Better than expected for Novo Nordisk

No "Trump Effect" on the Stockholm Stock Exchange
1 MIN READ

No "Trump Effect" on the Stockholm Stock Exchange