Swedish Krona Aims For New Record

The Swedish Krona looks set to record a record run of gains as a recovery from deep undervaluation extends.

"The market's remarkable appetite for the Swedish krona continues. Yesterday, the krona strengthened by 3 figures against the euro and is trading at 11.16 this morning. With yesterday's performance, the krona has strengthened 13 out of the last 15 trading days, touching its previous record," explains Gustav Helgesson, market strategist at SEB.

According to Helgesson, only on six previous occasions has the SEK strengthened over so many days in a row during a three-week window, and if EURSEK closes lower today, the krona will set a new "trend record".

Since February 01, the Swedish krona has appreciated by 3.5% against the dollar and by almost 2.5% against the euro. Against the pound, it is 2.0% firmer on the month.

"Risk sentiment in the FX market has turned positive, benefitting the more risky (high beta) currencies, like SEK," says Tommy von Brömsen, FX Strategist at Handelsbanken.

Risk sentiment remains constructive, with European equities outperforming U.S. equivalents in 2025, despite U.S. Donald Trump's tariff threats and preference for geopolitical isolation.

"In light of this, the movement in the krona seems less strange, as the SEK often develops relatively strongly in a 'risk on' environment," explains the analyst.

Can the rally continue? Jan von Gerich, Chief Analyst at Nordea Bank, says yes. The SEK has strengthened recently, and conditions are in place for further appreciation."

Above: EURSEK at daily intervals.

He explains that the repricing of the Riksbank's interest rate path, combined with Sweden's economic growth potential, favours further SEK gains.

"Interest rates have come down over the past year, which is a relief for households. Moreover, the business sector is competitive and fiscal policy is expansionary, reducing the need for the Riksbank to ease monetary policy further," explains the analyst.

Money market pricing shows investors now see the ECB's policy rate somewhat below the Riksbank’s later this year, implying an interest rate divergence that outright favours the Krona.

"With too high inflation, a stronger SEK is welcomed by the Riksbank as it helps to bring down inflation. From a short-term trading perspective, the momentum indicators are stretched, but the outlook for the SEK further out looks promising," adds von Genrich.

Above: GBPSEK at daily intervals.

Nordea lowers its EUR-SEK forecast on account of further SEK gains from 11.50 in three months to 11.20.

Helgesson at SEB says that despite the strong trend, valuations won't encumber the recovery; "it might be a good idea to remind ourselves that the krona is still trading in a historically weak range against the euro and the dollar."

Handelsbanken says the outperformance of SEK and NOK is linked to country-specific factors rather than risk sentiment.

The bank's researchers find support for the currency emerging from growth and value.

"The currency of a country with relatively high expected economic growth should outperform other currencies, and undervalued currencies should eventually outperform overvalued currencies," says von Brömsen.

"SEK and NOK stand out in both of these factors, as being undervalued, and with strong expected economic growth," he adds.