Krona Forecasts to Be Lifted at SEB
- Written by: Gary Howes
Image © SEB
A leading Scandinavian bank says it is readying to raise its SEK forecast profile.
"The Swedish Krona ticks the right boxes," according to SEB, the Stockholm-based northern European investment bank and lender.
The call comes as the bank tells clients it has raised its Krona forecast profile following a recent analysis.
Interestingly, that analysis makes a rare admission: "It is becoming quite difficult to explain what is driving Krona’s performance."
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It's a relief to read, as I have been struggling to give any kind of definitive narrative for SEK's barnstorming performance of recent months.
"The lack of explanatory power of a factor framework raises the question if there are other ‘unobservable/overlooked’ drivers of the Krona," says Namik Immelbäck, Chief Strategist at SEB.
SEB's updated list of overlooked drivers of SEK strength include:
- Hedge ratios ("large Swedish corporations reported further FX-related losses in Q4, meaning continued strengthening of the SEK could incentivise fresh hedges being added.")
- Retail flows ("Greenland tensions caused a mini ‘sell USA’ event. Recent updates from broker/trading platforms (Avanza and Nordnet) confirm that both US and Global mandate focused funds saw retail outflows in January in favor of Swedish and European equity mandates... foreign asset managers could be allocating more to Swedish equities as well – presumably not fully FX hedged.")
- Foreign ownership in local bonds (SGBs) has picked up though 2025.
More broadly, SEB says "the Swedish Krona ticks the right boxes - a cyclical macro recovery play with seemingly low beta to equities."
Analysts also wonder if SEK is increasingly looking interesting from an FX reserve diversification perspective.
"In light of this, we are updating our krona forecast and now expect a clearer appreciation during the year," says Immelbäck.
Risks to the bullish outlook include a SEK rally that is starting to look stretched vs rate differentials, though - widening of SEK rates vs Euro is likely necessary for an additional sizeable appreciation, which would be justified on the growth and bond issuance outlook.
"A risk is that a stronger SEK leads to inflation undershoot which tilts the Riksbank in a dovish direction," says Immelbäck.