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Analyst are now suggesting that the Swedish krona is not really as strong

Tuesday, 16 April 2013
There have been shouts and cries that the Swedish Krona has been strengthening and that it has got too strong that it is becoming a force that is killing businesses especially the export sector. An analyst has however challenged this view as not reflecting real position of the Swedish currency.

On the Swedish daily, Svenka dagbladet, Danske Bank analyst, Michael Grahn, said that the shouts that the Krona has got too strong is not correct because "generally speaking, the exchanges rate swings are hardly a problem for Swedish industries." He recalls that the krona is still much weaker than in 1992.

The Swedish krona may look strong after the recent surge, but in real terms, it is still about 20 percent lower than in 1992. According to Michael Grahn, fixed income strategist and macro economic analyst at Danske Bank, one must also consider that Sweden has had a more moderate wage growth, adjusted for productivity.

"Overall, today's exchange rate is not a problem either for Swedish industry and the Swedish inflation," he said to the Swedish daily Svenka dagbladet

The forestry sector in particular has been hit more by the surging krona. Four-fifths of the production in the sector is exported, and traditionally Europe turns out to be one of its main markets.

But despite the fact that the euro has fallen sharply in value in recent years, as well as now the British pound, the situation is hardly desperate. According to the trade organization of the forest sector, in its latest report, the forest sector fell - its total export value fell by 4 percent to Skr123 billion in 2012, compared with 2011.

So, after all, the crisis in Southern Europe, the sector has moderated some what. One explanation is that the forest companies have managed to switch over to North Africa, the Middle East and Asia, which saved the sales volumes last year.

Some export industries with its entire cost in Sweden, of course, see lower profitability, but there are many other industries in Sweden that can also benefit from a stronger krona. For example, the import of intermediate goods are cheaper, according to Michael Grahn, who expect the krona to continues to strengthen throughout the 2013.

Swedish companies that are more global such as SKF,  Autoliv which recently opened its eleventh plant in China see less impact of a surging krona.
by Team

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