The Riksbank may have set an imaginary line in the sand for EUR/SEK where it will decide to deploy some verbal intervention – potentially in the form of FX intervention threat. That could be the historical high at 11.68 or even higher around 12.00. It’s important, however, to note that Sweden does not have enough FX reserves to enter a sustainable FX intervention campaign in a volatile market environment, which is why we believe that a threat of FX intervention may not be followed by an actual deployment of market intervention.
We are keeping our year-end forecast around 11.00 for EUR/SEK, primarily on the back of the narrative of a rotation from the dollar back into European currencies in the second half of the year due to a slowdown in the US economy and aggressive Fed rate cuts. SEK has a high beta to European sentiment – which we expect to be good in 2H23 – plus it’s deeply undervalued and offers an attractive carry.
- ING FX Strategy
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