Focus on Sweden
Earlier today I highlighted the Swedish Krona as a currency worth focusing on. Last week it reached a new 2-year low against the U.S. Dollar, and is close to doing the same against the Japanese Yen. It is not very far from making the same benchmark against the Euro. Simply put, the Swedish Krona is in a long-term multi-year bearish trend, which should be of interest to Forex traders and investors. Another attractive factor in being short of the Swedish Krona is its negative base rate of -0.25% set by the Swedish National Bank. This means that most Forex brokers are not going to charge you much for holding short trades in the SEK overnight, and that will tend to make long-term trend trading more possible and more profitable.
Sweden is supposed to join the Euro, according to the terms of its accession agreement with the European Union upon its entry to the Union in 1995, but this isn’t going to happen any time soon. Public support for joining the Euro is very low, and Swedish politicians are also rightly extremely wary of trying to make it happen. Whilst the politicians, if not the people, might like the idea of joining the Euro, the currency would almost certainly prove to be dangerously deflationary for Sweden. So, the krona isn’t going anywhere.
So, what drives the long-term weakness of the Swedish Krona? There are a few plausible reasons. Sweden is a relatively small and open economy which is vulnerable to restrictions in terms of trade. There has been a flurry of protectionism since President Trump took office in the U.S.A. Yet perhaps most importantly, the Swedish Central Bank is happy to see the Krona gradually weaken, as it keeps Swedish goods competitive in the global marketplace. Furthermore, the Swedish economy seems to be suffering slowing growth and rising levels of household debt, neither of which will tend to raise the value of a country’s currency.