Riksbank and opportunities of Scandinavian currencies

03.07.2019 15:59|Forex conotoxia.com

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The two Scandinavian currencies - the Swedish krona and the Norwegian koruna in the past months drew attention due to their significant weakness in relation to other world currencies, including the Polish zloty.

The Swedish crown against the US dollar weakened in May to the level last observed in 2002. In turn, since the recent high, which was achieved in 2008, SEK lost over 40 percent to USD. This is a serious weakening of the currency even in so many years. In turn, in relation to the Polish zloty, the Swedish crown remains the weakest since 2010 being close to 0,4 PLN.

Such an important weakness of the currency has helped the Swedish economy over the years, increasing the competitiveness of exports, and also causing inflation to rise. Inflation in Sweden fluctuates around 2 percent, which is in line with the central bank's goal. Therefore, more and more is being said about the fact that the Riksbank could begin to normalize monetary policy, and this could affect the long-term trend observed in SEK.

Today, the central bank decided to leave the main interest rate at -0.25 percent, which was in line with the expectations of market participants. According to the statement, the main interest rate in Sweden is to remain unchanged for the following months, but there is a chance of a hike at the end of the year or at the beginning of the next year. However, this approach will still be verified as the situation unfolds abroad.

Thus, the Riksbank, next to Norges Bank, is another central bank in the world, talking about the possibility of interest rate hikes, not their cuts. This may, in the long run, affect the SEK and NOK which have depreciated over the years.

USD/SEK

USD/SEK weekly chart. Conotoxia trading platform

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.


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