The Swedish krona has corrected sharply lower in November. Looking ahead, economists at MUFG Bank expect the SEK to strengthen gradually against the euro as the Riksbank is set to outpace the European Central Bank in tightening policy.

COVID-19 cases in Sweden remain well below levels from previous waves

“It has been reassuring so far that new COVID-19 cases in Sweden remain well below levels from previous waves. It should help to dampen the need for the Swedish government to re-tighten restrictions over the winter and thereby limit further disruption for the domestic economy.” 

“The Riksbank is expected to lag other G10 central banks in raising rates alongside the ECB. It has just started to pencil in the first hike in 2024. However, we expect Riksbank to be more active in tightening policy through their balance sheet than the ECB. The Riksbank is considering plans to shrink the balance sheet in 2022. In these circumstances, we expect the krona to strengthen gradually against the euro in the year ahead.”