Sweden’s Krona Set for More Gains After Best Quarter in 15 Years

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Sweden’s Krona Set for More Gains After Best Quarter in 15 Years

foreign exchange :: 1day ago :: source - bloomberg

By Naomi Tajitsu

Sweden’s Krona Set for More Gains After Best Quarter in 15 Years. Bloomberg

(Bloomberg) -- Even after the best quarter in a decade and a half, Sweden’s currency rally still has room to run, SEB AB and Svenska Handelsbanken AB say.

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Despite short-term hurdles, the krona will strengthen a further 3% versus the euro by the end of the year, according to a SEB survey. It’s already up about 10% versus the dollar and almost 6% versus the euro in the first three months, the best performance in the period among Group-of-10 currencies in both cases, data compiled by Bloomberg show.

A three-year period of persistent weakness finally appears to be ending for the krona as Sweden’s economy recovers and Europe prepares to unleash hundreds of billions of euros in military spending.

Sweden could benefit more than other nations because its defense exports are among the biggest of major economies when measured as a share of gross domestic product. Companies including Saab AB and BAE Systems Hagglunds AB produce everything from fighter jets and submarines to support weapons, combat vehicles and airborne early-warning and control platforms.

The general outlook “is for a stronger krona for longer,” says Karl Steiner, head of analysis at SEB in Stockholm.

Bets on the currency have shifted significantly in favor of more gains, SEB says. A recent survey by the bank shows net overweight krona positions held by domestic investors are close to a record high. The rest of the market is seen as underweight, suggesting there may be room for offshore investors to turn more bullish in the future, Steiner said.

The survey respondents predict that one euro will buy 10.70 krona by mid-year — less than the 10.75 forecast in a Bloomberg FX poll — and just 10.50 by the end of 2025.

Michel Gubel, currency strategist at Svenska Handelsbanken AB in Stockholm, also sees more krona strength, though its immediate path may not be so smooth.

Short-term Hurdles

The currency typically faces seasonal outflows around this time of year as foreign investors reinvest the krona-denominated dividends they’ve earned from holding Swedish stocks, Gubel said.

According to MUFG’s Derek Halpenny, the krona’s gains look a little overdone, which means the currency could take bigger hit than peers should Donald Trump’s April 2 tariff announcement spook markets.

A slide in the euro to around $1.06 would likely drive the krona back to 11.00 versus the common currency, he said.

At the same time, SEB’s Steiner calls them “short-term tactical risks.”

“The major view is for a strategically stronger krona,” he said.