The Swedish krona and Norwegian krone gained against the dollar as the higher-yielding currencies benefitted from optimism on the euro.
Sweden’s krona rose 0.4 percent against the dollar, and was the fifth-best performer among 17 major currencies. Norway’s krone gained 0.35 percent versus the dollar. The krona traded at 6.481 per dollar, while the Norwegian currency was at 5.5502 per dollar as of 2:51 p.m. in Oslo. Denmark’s krone, which is pegged to the euro, advanced 0.5 percent to 5.5874 per dollar.
“One of the key drivers of recent days has been euro buying, potentially on the back of a move in the European money market rates coming up a bit,” said Kasper Kirkegaard, a currency strategist at Danske Bank A/S in Copenhagen. “That has pushed euro-dollar higher and also supports the other European currencies against the dollar, hence support for the Scandies.”
The Nordic region emerged as a haven last year from Europe’s debt crisis and is now also benefiting from rekindled interest in the euro amid signs European leaders are containing the turmoil. The euro gained as much as 0.5 percent against the dollar, after Spain’s borrowing costs declined, underscoring demand for the region’s higher yielding assets.
Norway, which is backed by a $700 billion wealth fund and boasts the largest budget surplus of any AAA rated nation, has provided investors refuge from Europe’s debt crisis. The world’s fourth-richest nation per capita is withstanding a recession in the euro area, and even displaying signs of overheating, amid record investment in its petroleum industry.
Sweden has also managed to sustain economic growth even as exports slump. The Swedish Riksbank last month lowered its benchmark rate to 1 percent, and signaled it won’t cut rates further. The European Central Bank’s rate is at 0.75 percent. Norway has a benchmark rate of 1.5 percent.
“What we’re seeing now is both currencies trading sideways against a very strong euro, that’s the residual of the dollar weakening against both Scandies,” said Carl Hammer, chief currency strategist at SEB AB in Stockholm. “The trade-weighted euro is making gains, so the trade-weighted krone and krona are also gaining once again. From a trade-weighted perspective euro holds about 50-55% for both countries, so the most important thing for the trade-weighted Scandies is obviously euro developments.”
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