The Swedish krona is inexplicably strong given the current economic climate

A strong Swedish defense industry, together with increasingly high inflation, is slowing the prospects for future policy rate cuts. The less Sweden lowers its policy rate, the more the Swedish krona can strengthen against other currencies, says SVT's economic commentator Alexander Norén. The combination of Swedish inflation, together with the geopolitical situation and uncertainty about US tariffs, has caused the Swedish krona to move sharply.

For example, €1 cost 10.99 SEK on March 6, 2025. It was the first time in two years that the euro fell below 11 SEK. On the same day, $1 cost 10.19 SEK, which should be compared to 10.80 SEK the week before. The development can be partly explained by the fact that the chance of further policy rate cuts in the near future from Sweden's central bank AKA the Riksbank is now considered extremely unlikely.

In addition, the outside world believes that there will be more investments in Sweden and that more goods and services will be purchased from Sweden, not least because there will be major defense investments in Europe and Sweden has large defense companies that export. Sometimes a few signals that the Swedish krona is undervalued can be enough to start a positive spiral that Sweden seems to be in right now.

If you want to be a little conspiratorial, you can suspect that there is an underlying agenda between Sweden and the EU to strengthen the Swedish krona ahead of a rapid transition to the euro in Sweden. Who knows, maybe Sweden will replace the Swedish krona with the euro in the near future.😉

AI generated image with Grok