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Forex pairs in this Article » EUR/SEK (Barcelona) - Having rallied strongly between May and August this year, the SEK has given back ground over the past three months write the HSBC research team.

They note that this setback seems to have been driven by three factors:

Firstly, the general recovery in EUR has put upward pressure on EURSEK. Secondly, with SEK still perceived as influenced by equities, the fading of the equity market rally has had a negative impact. Finally, disappointing growth data in Sweden has turned the Riksbank significantly more dovish. The team note that rates were cut in September and two of the six Executive Board Members voted for a further cut in October. A cut in December is distinctly possible and the team suspect that the final factor has probably been the main driving force for the SEK reversal.

However, despite the setback, the team feel that the positives for SEK outweigh the negatives and they expect its rally to resume. On the cyclical side, continued Riksbank dovishness will be limited by growing concerns over the level of household debt. They note that at the same time the structural positives such as the large current account surplus and the balanced budget will keep SEK attractive. The finish by writing, "Unlike some other structurally positive currencies, SEK is not 'overvalued' and policymakers are largely unconcerned about its level, so its scope for appreciation remains."
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