Pound and dollar hit new krona lows

The international credit crisis has pushed the US dollar and the British pound to new lows against the Swedish krona. The pound was on Wednesday threatening to fall below the 12 kronor mark for the second time in a week, and the dollar was hovering just a fraction above a historically low level of 6 kronor.

Published: 26 March 2008 19:38 CET

Sweden’s relatively robust growth, low unemployment and sound public finances are being credited for the strength of the krona against the American and British currencies.

“This is essentially more of a pound and dollar story than it is a krona story,” Johan Javeus, currency analyst at bank SEB told The Local.

The US currency is being pounded due to the credit crunch and the economic uncertainty that has followed from the difficulties in the financial system. The pound is performing poorly against many international currencies due to the UK’s reliance on financial services and “not-so-solid fundamentals,” particularly its current account deficit, said Javeus.

The last time the pound fell below 12 kronor was in 1997; the dollar has not been as low against the krona since 1992. The strength of the krona is good news for Swedes investing in the US or UK and for those travelling across the Atlantic or North Sea with kronor in their pockets, although it is bad news for Swedish exporters, who will find their products more costly on the vital US market.

Yet while the krona is performing well against the dollar and pound, the euro exchange rate has been telling a different story. On Wednesday the euro was fetching 9.39 kronor in Stockholm, close to the highest value in the currency’s existence.

“The krona is certainly weak against the euro. Smaller currencies such as the kronor are being overlooked by investors, despite the strong fundamentals” said Javeus.

Further falls are expected for the dollar and pound against the Swedish currency over the next few months.

“The dollar could be down to about 5kr80 by the summer, but again this is more a reflection on the dollar than the kronor,” said Javeus.

“Basically it’s the same story for the pound – we see more weakness there,” he added.

The krona could also see rises against the euro if the Swedish government’s privatization process sees Absolut Vodka maker Vin&Sprit sold to a foreign company, although overall “the outlook is stable for the krona rate against the euro,” Javeus said.