Since the geopolitical unrest has increased, in terms of security policy and uncertainty surrounding the US tariffs, the Swedish krona has rapidly appreciated in value, contrary to what is usually the case.
Actually, one usually says that small currencies are disadvantaged during turbulent times, says Alexandra Stråberg, chief economist at Länsförsäkringar.
However, in just one week, the krona has strengthened historically powerfully, one has to go back to the days of the financial crisis around 2008 to find similar large movements. A week ago, the dollar cost 10.80, now it is below 10.10. Against the euro, it's about a strengthening of around 30 öre to 10.90 kronor, below 11 kronor for the first time in over two years.
Stråberg sees two factors:
We have a fairly large defense industry and defense exports as a share of GDP, and then one probably thinks that it will strengthen the Swedish economy significantly. The growth in Sweden is likely to increase more than, for example, in the eurozone, she says.
The increasingly high inflation means that the prospects for further interest rate cuts are disappearing. This strengthens the krona. The stronger Swedish currency means that the price pressure on imported goods should decrease.
The view on the Swedish economy has changed for the better, according to Tommy von Brömsen, currency strategist at Handelsbanken.
One now sees that within the Swedish economy, things look quite bright, interest rates have come down, and we have tax cuts.
In addition, economists see the Swedish krona as undervalued, even after the latest strengthening, according to von Brömsen.
— Furthermore, there is significant fiscal policy space. It works a bit like an insurance policy that even if the economy were to go badly, Sweden has great opportunities to "rescue the economy".
