Currency expert: “The Swedish krona is now so weak that it can be compared to a country that has been hit by a coup d’état”

The Swedish krona is the worst major currency this year, trading near the lowest since the global credit crunch in 2009, even though the Riksbank (Bank of Sweden) has started to lift its crisis-era stimulus.
SEB and Nordea Bank believe policy makers concerned about volatility and the impact on inflation may step in to intervene verbally if it slips further to approach a nine-year low of 11 per euro.
“It’s a matter of confidence. The currency is after all a signal about the state of the economy”, says Carl Hammer, head of currency research at SEB, Sweden’s biggest bank by market value.
“It was clear that the Riksbank wasn’t happy with the situation the last time there was a slide toward these levels.”
A basket of foreign currencies keep getting more expensive for Swedes. The krona’s direction this year is indeed more in line with Haiti’s gourde than the gains of most of its Group-of-10 peers.
“The Riksbank has sacrificed the krona to get inflation back to target, but there are limits to that too, and a too weak and too volatile currency isn’t good for the economy”, says Nordea’s chief analyst Torbjörn Isaksson.
“They may initially say that they’re not comfortable with it and that they don’t understand it. And they can add other measures later.”
“The Swedish krona is now so weak that it can be compared to a country that has suffered a coup d’état. And it may become even weaker”, states Henrik Unell, another Nordea chief analyst, in a market letter.
He points out among others the Riksbank as responsible.
“When the institution that is to take the lead in defending the krona says that it is not the Riksbank’s task to strengthen the krona exchange rate, they communicate to the surrounding world that they ignore all the consequences of their inflation policy. Bad judgement is the most expensive of risks”, writes Henrik Unell.

The post Currency expert: “The Swedish krona is now so weak that it can be compared to a country that has been hit by a coup d’état” appeared first on Voice of Europe.

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Author: Emma R.


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