Strong growth boosts Sweden’s krona

published 10 June 2011

Sweden's krona has been a star performer on the foreign exchange market of late. Chalk it up to a strong recovery in Sweden's economy, which implies further interest-rate rises by the central bank. It has already hiked six times since last summer to keep inflation in check.

The Swedish economy produced the strongest growth in the G10 last year, almost 6%, and expanded by an annual 6.4% in the first quarter. All the signs are that "we will continue to see broad-based growth... spurred by exports...households and the public sector", says Annika Winsth of Nordea Bank. Firms are optimistic about the next few months. Morgan Stanley notes that long-term inflation expectations are rising, while the tightening labour market implies upward pressure on wages. "We continue to view pullbacks... as buying opportunities." Morgan Stanley sees scope for further gains against the greenback over the summer and also thinks the krona currently looks a good bet against sterling, which is being undermined by a weakening growth outlook.