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Banking

SEK moves toward FX safe-haven status

The SEK is viewed in the FX market as “less pro-cyclical currency” than ever before, according to the results of a survey from SEB.

The survey found that the effect of an SEK repricing could be “lasting” for a variety of reasons, including bearish predictions from the market that a September 6 Riksbank meeting will see the central bank leave Swedish benchmark interest rates unchanged. The SEK could be set to become the FX market’s safe haven of choice in the near-term, as the AUDUSD and NZDUSD trades become overvalued, says SEB head of FX strategy Carl Hammer.

“According to our model, the AUD and NZD are overvalued, and we have been expecting some market reorientation toward skandies away from the front-runner reserve currencies,” says Hammer.

“We might now see some more skandie strength versus other reserve currencies.”

 Tight correlation between SEK and risk appetite

 
 Source: SEB

Long-running eurozone debt problems have seen investors flock to safe-haven currencies such as the CHF and DKK in recent months, as fears grow that the EUR could devalue before the end of this year. The SEK's safe-haven status is also growing, with respondents to the SEB survey claiming they are unconcerned that a strengthening krona could have a negative impact on Swedish exports.


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