Course history

The Swedish krona is a relatively new currency that began to be used in the 19th century, although its genesis began with the rapid development of banking as early as the 17th century.

The first banking institution in Sweden was founded in 1656, during the final reign of Charles X Gustav (1622-1660). This ruler sought to expand and control the Baltic Sea area, which required strengthening the Swedish economy. Soon after, the first banknotes were introduced, but the currency was called "Riksdaler" until 1873, when it was replaced by the krona after the union with Sweden was formed.

Before the adoption of the euro, the Swedish krona had a turbulent past. In the 1970s and early 1990s, Sweden struggled with high inflation, which caused the currency's value to become unstable. In the 1990s, the country was hit by a financial crisis, which caused the Swedish krona to weaken significantly. The central bank had to intervene by increasing interest rates to stop the further weakening of the currency. Despite some difficulties, Sweden remained outside the monetary union, not adopting the euro. Despite this, the Swedish krona has retained its stability and has become an attractive currency for investors.

After entering into a partnership with the European Union, Sweden pegged its currency to the ECU (European currency unit), which was the predecessor of the euro. Only joint action could restore Sweden's stability, which had been lost after the collapse of the Bretton Woods system.

Top currency pairs

Currency pairs that contain SEK are important for traders, investors, and financial institutions that deal with currency exchange, especially in the international forex market. Here are some of the major currency pairs that include SEK that we also talk about on Webinar Universe:

• USD/SEK (US dollar to Swedish krona) - this is a currency pair that reflects the ratio between the dollar and the Swedish krona;
• EUR/SEK (Euro to Swedish Krona) - This pair determines the value of the euro against the Swedish krona. It is also an essential currency pair for international trade;
• GBP/SEK (Pound Sterling to Swedish Krona) - This pair reflects the ratio between the British Pound and the Swedish Krona;
• NOK/SEK (Norwegian Krone to Swedish Krone) - is a currency pair that shows the value of the Norwegian Krone against the Swedish Krone. Norway and Sweden are neighbouring Nordic countries, so this pair is important for both economies;
• SEK/JPY (Swedish Krona to Japanese Yen) - This pair reflects the ratio between the Swedish Krona and the Japanese Yen.

Course Factors

Sweden's strong economy, as well as SEK's position on the international currency market, depends primarily on the prices of raw materials that the country produces. In the 20th century, Sweden became one of the main exporters of iron ore. The biggest boom in mining took place in 1975, when a record production of 40 million tons was reached. In addition to iron ore, Sweden also mines zinc, lead, copper, tungsten, titanium, and uranium ores. An important factor determining the condition of the currency is also wood production. Sweden is one of the world's largest exporters of cellulose.

When analyzing the factors of the Swedish krona exchange rate, one should not forget about the role of the Central Bank of Sweden — the Riksbank. In 2018, the institution celebrated its 350th anniversary. The Riksbank is an independent entity, and its main tasks are to set interest rates and control the stability of the SEK. It should not be forgotten that the central bank of Sweden, like the same institutions of other countries, tries to implement the policy of inflation targeting. This means that it is striving to achieve the expected level of inflation. Therefore, reports on the CPI reading have an indirect impact on the quotations of the Swedish krona, which we talk about on the training platform.

Future predictions

In the fourth quarter of 2023, after two quarters of decline, Sweden's GDP recorded a slight increase of 0.1%, but below market expectations of 0.3%. The total decline in the economy was then 0.3% for the whole year. In June 2022, the SEK/PLN exchange rate rose to around 0.4552, and then fell to around 0.4402 in August 2022.

Nordea Bank expects inflation to continue falling, but it will take until mid-2024 for price developments to reach a low enough level to allow for monetary easing. In the context of rising unemployment and the European Central Bank's interest rate cut in June, it predicts that the Riksbank will take an initial interest rate cut in September 2024. He will then present a full report on monetary policy. Ultimately, you can expect the base interest rate to be 3.50% at the end of 2024 and drop to 2.50% a year later, and we talk about the reasons on Webinar Universe.

In conclusion, according to analysts, the current volatility of the Swedish krona is mainly due to external factors, such as global economic and political events. It is noted that the Swedish krona often reacts to interest rate differentials between Sweden and other countries, which can lead to sudden changes in the exchange rate. In addition, investors' expectations about future economic trends can affect the value of the krona, especially if they anticipate an expansionary monetary policy.