Sweden’s krona gained against the dollar and the euro after the head of the nation’s state-backed export bank, SEK, warned against betting on further declines.
The krona rose as much as 0.5 percent against the euro to trade 0.2 percent higher at 8.7704 as of 12:24 p.m. in Stockholm. Versus the dollar, the krona gained as much as 0.6 percent.
The gains come after a sell-off through last week following signals from the U.S. Federal Reserve it’s preparing to scale back stimulus. Prime Minister Fredrik Reinfeldt said in an interview earlier in the week the depreciation was a relief for exporters. Still, it’s risky to anticipate more currency weakness as Sweden’s economy is healthy enough to support a strong exchange rate, according to Peter Yngwe, chief executive officer of SEK.
“They shouldn’t expect a krona that will weaken significantly,” Yngwe said in an interview yesterday. “There is no reason for the krona to fall significantly other than these short-term fluctuations.”
The krona appreciated 31 percent against the euro from the end of 2008 through the middle of March this year as investors poured funds into Sweden’s AAA rated bonds. That prompted warnings from Finance Minister Anders Borg that excessive krona strength could become an obstacle for the nation’s exporters.
“We have strong finances, in other words fundamentals are good,” Yngwe said. “The krona is a small currency; one should be clear about that.”
According to Anders Eklof at Swedbank AB, the warning from SEK paints a “fair picture” of the outlook for the krona.
“The Swedish economy will stand relatively strong,” he said by phone today. “We’re expecting the krona to strengthen a bit toward 8.40” per euro “in three months, but then the krona will gradually weaken in one year’s time versus the dollar,” he said.
Yngwe said trading on Sweden’s haven status is safer for long-term investors than for speculators.
“If you buy the Swedish krona to invest and stick with the investment for a long time before exiting, then one should feel that it’s pretty safe,” he said. “But if you’re buying to make a quick deal, it’s probably not a safe haven, since it’s so sensitive” to market volatility.
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