What Is the SEK (Swedish Krona)?
SEK is the currency code for the Swedish krona, the currency for Sweden. The Swedish krona is made up of 100 öre and is often presented with the symbol kr. The krona, which means "crown" in English, is also known in Sweden as the "spänn" or "kosing." Sweden has no minimum wage, but the krona remains strong.
- The Swedish krona is the official currency of Sweden.
- The currency code for the krona is SEK, and the abbreviation is kr.
- While Sweden is expected to adopt the euro at some point, there is little urgency as the Swedish population is not in favor of switching currencies.
- The e-krona is a digital version of the krona, used via an app, and is expected to phase out the use of cash.
Understanding the SEK (Swedish Krona)
The Swedish krona replaced the riksdaler riksmynt at par in 1873 when the Scandinavian Monetary Union was formed. This union of Sweden and Denmark used the gold standard to value the krona at 0.04032% a kilogram of gold, and two years later Norway joined the union pegging its currency at the same value as its Scandinavian counterparts. After WWI and the break-up of the union, the currencies were separated, and Sweden kept its own respective krona.
Since 1992, the exchange rate has been allowed to float against other currencies, with the central bank intervening when necessary to stabilize the krona's value.
The most heavily traded currency pair involving the SEK is the EUR/SEK, or the euro versus the krona.
Sweden is expected to join the eurozone, and adopt the euro, as part of the accession treaty of 1995, although the majority of politicians and citizens are not in favor of adopting the euro. Therefore, there is no urgency to give up the krona, and as of 2019, there are no plans to switch over.
SEK and Negative Rates
In July 2009, Sweden became the first country to experiment with negative interest rates when the Riksbank, the Swedish Central Bank, lowered the target interest rate to 0.25 percent, which caused the deposit rate to fall to -0.25 percent. Initially, the SEK strengthened as pundits saw it as a positive that Sweden was taking a strong initiative to right its economy amidst the Great Recession of 2007 to 2009.
However, over the coming years, the Swedish economy floundered, and in 2014 the Riksbank dropped the target rate to zero, which saw the deposit rate fall a further 25 basis points to -0.50 percent. This resulted in a prolonged period of weakness in the krona, and in the 12-months following the shift, the krona fell by more than 25 percent against the U.S. dollar.
From 2016 to 2018 the target rate was dropped to -0.5, then back to -0.25 in late 2018.
Correlations of the SEK
The SEK is strongly correlated with its Scandinavian counterparts the Danish krone (DKK) and the Norwegian krone (NOK). The following chart shows the SEK/USD, DKK/USD, and NOK/USD all on the same chart. They tend to move together, although at certain times one may be stronger than the others.
Swedish Krona (SEK) Coins and Bills
Currently in circulation, there are one, two, five, and 10 kronor (plural) coins. In terms of bills, there are 20, 50, 100, 200, 500, and 1,000 kronor bills.
The use of cash in Sweden has declined dramatically leading to the dismantling of many automated teller machines (ATMs) and the introduction of an e-Krona. The e-Krona is a digital currency controlled by the Riksbank and is exchanged through the "Swish" app, which more than half of the Swedish population uses. While the e-Krona hasn't officially been adopted, as cash is still in use, it is likely that it will eventually phase out cash payments altogether.
Example of Exchange Rate Conversion Using the Swedish Krona (SEK)
Assume that the SEK/USD exchange rate is 0.1250. That means it costs US$0.1250 to buy one krona. To find how many kronor it takes to buy one U.S. dollar, divide one by the exchange rate: 1 / 0.1250 = 8. It takes eight kronor to buy one USD. This is the rate for the USD/SEK currency pair; notice how the currencies have flipped position.
If the SEK/USD rate moves up to 0.1425, the SEK has increased in value relative to the USD, and the USD has decreased in value relative to the krona. It now costs more USD to buy one krona.
If the rate falls to 0.10, the SEK has decreased in value relative to the USD. It now costs fewer USD to buy one SEK.