Economics, Econometrics and Finance
4 years ago

Swedish Krona Weakness Unexplained: Traders Speculate, Currency Undervalued

MPRA Paper
Is there any theory that explains the SEK
Christos Papahristodoulou

Paper Summary

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The article investigates why the Swedish krona (SEK) is weak against the US dollar ()andEuro(€)despitefactorslikepurchasingpowerparity,interestrates,tradebalance,anddebtratio.NoneofthesefactorsexplaintheweakSEK.LowerinflationandinterestratesinSwedenhaven′tstrengthenedthecurrency.Tradebalancesurplusesandlowdebtratioalsohaven′thelped.TradersandinvestorsseemtoignorethesefactorsandkeeptheSEKundervalued.Predictionssuggestthatexchangerateswillimprovebytheendof2020,with) and Euro (€) despite factors like purchasing power parity, interest rates, trade balance, and debt ratio. None of these factors explain the weak SEK. Lower inflation and interest rates in Sweden haven't strengthened the currency. Trade balance surpluses and low debt ratio also haven't helped. Traders and investors seem to ignore these factors and keep the SEK undervalued. Predictions suggest that exchange rates will improve by the end of 2020, with )andEuro(€)despitefactorslikepurchasingpowerparity,interestrates,tradebalance,anddebtratio.NoneofthesefactorsexplaintheweakSEK.LowerinflationandinterestratesinSwedenhaven′tstrengthenedthecurrency.Tradebalancesurplusesandlowdebtratioalsohaven′thelped.TradersandinvestorsseemtoignorethesefactorsandkeeptheSEKundervalued.Predictionssuggestthatexchangerateswillimprovebytheendof2020,with and € costing around 8 and 9.8 SEK respectively.