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Investing.com -- UBS analysts have indicated that the Swedish krona (SEK) is expected to continue its upward trajectory, despite its strong performance so far this year. The firm suggests that the SEK still has room to appreciate, with significant repatriation of foreign assets into domestic assets by Swedish institutional investors yet to occur.
These moves, which include reallocating investments from US assets to domestic ones and potentially increasing hedge ratios as the SEK appreciates, are anticipated to provide additional support for the currency.
In Sweden, the economic outlook remains positive with production recovering and the effects of monetary policy easing soon expected to contribute to the real economy. This is further bolstered by expansive fiscal policy.
UBS predicts that the Riksbank, Sweden’s central bank, may cut rates again due to global uncertainty, but this action is not expected to negatively impact the SEK. Instead, the focus is on fostering growth.
Globally, the situation appears to be improving, with progress on tariff issues and ongoing negotiations. This global optimism, combined with the SEK’s undervaluation compared to pre-pandemic levels, positions the krona as a strong candidate for further appreciation. UBS forecasts that the EUR/SEK exchange rate could decrease to 10.50 next year.
The investment outlook for the SEK is framed by resistance levels around 11.20 and support at recent lows of 10.70. However, UBS notes a risk bias: if an aggressive trade war emerges and Europe falls into recession, the EUR/SEK could rise back to 11.50.
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