Krona Strength Now A 'Problem' SEK/EUR

Published: 9 May at 6 PM Tags: Euro, America, Eurozone, New Zealand Dollar, New Zealand, USA, Sweden,

Earlier this week Graeme Wheeler, Governor of the Reserve Bank of New Zealand, intimated that the central bank had intervened in order to lower the ‘Kiwi’s export-damaging exchange rate strength.

Now Sweden’s Finance Minister has reasserted his belief that his nation must act if the Krona’s advancement continues to negatively impact conditions for exporters.
As exports account for roughly 50% of Sweden’s economic output, ensuring Sweden remains competitive is essential for the nation’s continued growth. But as the struggling Eurozone is one of Sweden’s major export markets the Krona’s strength is having a concerning effect on trade. Just last week the Finance Minister slashed his growth forecasts for next year as a result of the damage the export situation

Sweden is now one of a handful of European nations which has managed to hold on to its coveted AAA credit rating, making it something of a safe-haven in tumultuous times. Since the onset of the global financial crisis in 2008 the Krona has climbed by 28 per cent against a fluctuating Euro.

During a televised interview Anders Borg asserted: ‘Given the slowdown in European markets, for us to stay competitive we need to think also about the currency. The market should set the price of the currency, it’s a free floating currency, but we can’t ignore if there’s a potential risk for excessive movements in the markets [...] I do think the Krona is potentially becoming a little bit of a problem, so I think we have to watch it very carefully to see where it goes. I don’t think it’s dramatically off fair value today but if it continues to move and we are becoming a safe-haven it could be a problem’.

Already this week Borg has stated that the Krona’s strength could become a cause for concern for the Riksbank, remarking: ‘I strongly support the central bank’s independence but we also have to have a discussion about where the currency is heading.’

As of Thursday, 9th May 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1851, GBP USD exchange rate was 1.5452, and GBP NZD exchange rate was 1.8378.

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