That the Swedish Krona is over valued?

Thursday, 12 July 2012
The krona is very strong and trading against the euro, the currency recorded its highest number since 2000. This has been blamed on the Swedish central bank, the Riksbank’s relatively tight monetary policy, a decent development on the stock market and higher interest rate differences between Sweden and the euro area.

That what the Nordea thinks in a write – up in its market letter on Thursday.
The krona’s strength depends on the fact that Swedish economy is quite resilient despite problems in the euro area and that the Riksbank is reluctant to stimulate the economy when the rest of the world central banks are competing in weakening their currencies through what could be called quantitative easing and various forms of stimulus, writes the bank.

From a “fair value “perspective, however, Nordea feels that the Swedish krona is overvalued.
In terms of the Riksbank’s TCW forecast on currency, the currency has appreciated further. The rapid pace of the gain may be a problem for companies that need time to adjust to new prices and exchange rates. This can bring more focus on the krona in future interest rate debate if the development continues.

This has made Nordea to the response to the development by revising up its forecasts for the krona against the euro for the entire forecast period extending to the end of 2013.

The Bank expects that the krona will depreciate slightly in the future because they expect a weaker cyclical picture, which will lead to lower interest rate spreads and weaker Swedish order books for exporting companies.
By Scancomark.se Team

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