In the foreign exchange market, SEK is the abbreviation of Swedish krona, which is the national currency of Sweden. This is one of the leading currencies that are currently traded on the global Forex market.
The krona, which means “crown” in Swedish, has been the currency of Sweden since 1873 after the signing of the Scandinavian Union agreement when Norway, Denmark, and Sweden replaced the national currencies with the krone.
One krona consists of 100 eras, but in everyday life, the Swedes do not use coins and round up prices to 1 SEK.
The Swedish krona has a strong currency correlation with the currencies of other Nordic countries, such as Danish krone (DKK) and Norwegian krone (NOK).
While most countries in the European Union have adopted the euro, Sweden, like Denmark and Norway, is one of the few EU member states that have decided to keep their old currencies.
Even though the Maastricht Treaty holds Sweden responsible for the possible conversion into euros, a referendum in 2003 showed that 56 percent of voters opposed the new currency, and since then the country has refused to join the euro, avoiding the specific necessary monetary requirements which would require its implementation.
The government declared it would not hold a new referendum on this issue until it received sufficient support from the population, but the craving for the euro only declined over the following years.
Although there is still debate on this topic, it seems that there are no conversion plans soon. EUR/SEK is the most significant exchange rate in Scandinavia and directly affects the fluctuations in the CHF/SEK pair.
With a weak euro, the franc is gaining strength and dominates among other currencies in the eurozone, but from 2017-2018, the Swedish krona began to be regarded as a hedging instrument, which made the CHF/SEK trade quite interesting and potentially profitable.
Despite Sweden’s relatively small economy, the country stands out for its well-educated and technically savvy workforce and the fact that many multinational corporations operate under its jurisdiction.
However, global uncertainties, especially during the threats of the international trade war, have led to some losses for SEK. As a result, investors are apprehensive about the asset and are not in a hurry to invest money in it.
An ill-conceived economic policy led to a general weakness of the Swedish krona for four years, from 2015 to 2019. Although many expect that the krona will eventually rebound strongly, some are calling for the switch to the euro, given the global sensitivity of the Swedish currency.
Despite this, SEK along with CHF are seen as an effective way to save capital. Amid the falling profitability of Swiss bonds in 2018-2019, the relatively stable exchange rate of the Swedish krona inspires trust.
This situation ultimately leads to investors investing in both SEK and CHF. The growth in demand leads to a rise in the price of the currency, as a result, a switch to another asset occurs, where the price of krona is growing instead of the franc or vice versa.
Such volatility is quite predictable; therefore, it can be used to obtain high margins in the medium term.
With the growing uncertainty around the euro and the unfaltering ambitions of the United States, financial circles will seek safe havens for investments, so the demand for both currencies will only grow. This means that in the foreseeable future, the pair may become more liquid and displace classical instruments.
It will be useful for traders to learn how to work with it until CHF/SEK becomes super popular and becomes a speculative instrument like the EUR/USD pair.