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
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
by Scancomark.com Team
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