FX Strategy
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EUR/SEK to remain elevated
Tue, Nov 25 2008, 14:42 GMT
by Stefan Mellin
Last week we wrote that EUR/SEK was likely to test 10.30 and even 10.40 in the coming weeks (it was trading at 10.22 then), and that we preferred to be long EUR/SEK during this period (see "PPM and EUR/SEK: Buy on 'rumour' sell on fact", 20 November). As it turned out we substantially underestimated the dynamics. On Friday the SEK experienced perhaps the craziest day ever as EUR/SEK first fell from 10.36 to 10.26 in the morning and the spiked to 10.69 in the afternoon, 43 figures in just a few hours. The 20 figure collapse since then suggests that this was an overshoot. Falling equity markets bolstered the move as rebalancing needs continue to put downward pressure on SEK crosses where a thin market exaggerates the movements. While we believe pure currency hedging among Swedish portfolio managers was one explanation behind the sharp rise in EUR/SEK, increasing risk aversion is at play too - last week in particular related to rumours and heightened worries of an immediate devaluation in Latvia. Both the IMF and the EU commission have responded positively to Latvia's request for financial support. IMF says it "stands ready to rapidly assist the efforts of a comprehensive economic program, in close cooperation with EU."
Published on Tue, Nov 25 2008, 14:48 GMT
Archive
- EUR/GBP: To parity or not to parity?
Published On Wed, Dec 24 2008, 14:53 GMT - Speculative investors reduce USD longs significantly
Published On Tue, Dec 23 2008, 14:34 GMT - EUR/SEK to remain elevated
Published On Tue, Nov 25 2008, 14:42 GMT - Further reduction of EUR shorts, speculative investors turn bullish on oil
Published On Tue, Nov 25 2008, 14:29 GMT - Go short EUR/USD , EUR/CHF - long GBP/CAD
Published On Tue, Nov 18 2008, 17:52 GMT
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