EUR/SEK: Krona to rebound further from undervalued levels – MUFG

FXStreet Insights Team FXStreet

The Krona has staged a strong rebound in July which marks an abrupt reversal of losses sustained during the the first half of this year. Economists at MUFG bank analyze SEK outlook.

Elevated inflation keeps pressure on Riksbank to keep hiking rates

The Krona has derived support over the past month from building investor optimism over a softer landing for the global economy.

Riksbank has announced policies recently that are helping to provide more support for the SEK. The Riksbank has signalled concern over upside inflation risks from the weaker Krona. Unlike in other major economies, inflation in Sweden is continuing to surprise to the upside in the near-term which is keeping pressure on the Riksbank to hike rates further.

From September of this year, the Riksbank will also increase the pace of government bond sales from SEK3.5 billion to SEK5.0 billion per month. At the same time, the Riksbank has announced that it is considering hedging part of their FX reserves. The hedging flow should provide more support for the Krona later this year.

EUR/SEK – Q3 2023 11.60 Q4 2023 11.50 Q1 2024 11.40 Q2 2024 11.30

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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