Why Swedish Krona is One to Beat

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The Swedish krona is enjoying a remarkable run.

Sweden's central bank might have just cut interest rates for the last time in a development that will likely underpin a stunning outperformance by the country's currency.

The Krona is 2025's best performing G10 currency, advancing against all peers, helped by a firming domestic economy and the global 'risk on' pulse that is linked to the global optimism stemming from the U.S. Federal Reserve's decision to begin a new cycle of rate cuts.

Sweden's central bank - the Riksbank - on Tuesday cut its base rate by 0.25 percentage points to 1.75% and all guidance pointed to this being the resting place with no further reductions now likely.

A stable base rate means domestic bond yields are likely to firm up, and lend support to the SEK in the process.

"The reaction of the Swedish krone and Norwegian krona to recent rate cuts (both of which were close calls) reinforces the Scandinavian currencies' current status as darlings of the European market," says Kit Juckes, head of FX research at Société Générale.

"Riksbank one and done was taken well by FX market. We remain constructive on SEK going forward, as the economy recovers," says Bank of America in response to the decision.

In fact, looking ahead, the next move from the Riksbank will likely be a rate hike in 2026, a move that should offer outright support to domestic bond yields.

Bank of America's currency analysts look for ongoing Krona outperformance on the basis that the domestic economy is well poised for recovery, while inflation is likely to remain well behaved.

This suggests the country will avoid that currency-negative combination of a slowing economy and elevated above-target inflation, something that currently worries the British pound.

The pound to krona exchange rate (GBP/SEK) is now 8.80% lower on the year, with spot last seen at 12.6366. To be sure, GBP/SEK has risen for the past four years in a row, but the current price action sends a strong signal that the tide might be turning in favour of SEK on a longer-term basis.

Top of the pops: SEK is higher against all G10 peers this year.

"Riksbank one and done, which the FX market took well. We remain constructive on SEK going forward, as the economy starts recovering. Positioning for SEK has been light to short, especially among Asset Managers while there remains room for adjustments in local asset managers hedge ratios," says Bank of America.

The SEK has been an outperformer alongside the EUR in 2025, confirming European currencies have particularly benefited from the U.S. Dollar selloff.

The SEK is also a 'risk on' currency that tends to outperform when investors are confident, as testified by the current strong bull run in global markets.

That helpful sentiment has recently been boosted by the Federal Reserve's decision to restart its rate cutting cycle, which should lower the cost of finance across the globe and further encourage the rally in stocks.

And when sentiment is buoyant, so is Sweden's currency.