Sweden and Norway are losing their appeal as havens from Europe’s debt crisis at a time when the krona and krone are more overvalued than at almost any point in the past 40 years.
Sweden’s central bank cut interest rates for a second- straight meeting on Feb. 16 after exports, accounting for about half of the nation’s output, fell 6 percent in December. Norway’s foreign trade slid 4.3 percent in the fourth quarter. The Swedish krona is about 25 percent too expensive, and the Norwegian krone more than 40 percent based on an Organization for Economic Cooperation and Development measure of the relative costs of goods and services.
Concern the krona’s appreciation is weighing on growth amid the euro-region’s turmoil marks a reversal from late 2010, when Riksbank Governor Stefan Ingves dismissed calls to manage the currency. His Norwegian counterpart, Oeystein Olsen, said last week he’s ready to act on krone strength even as European leaders crafted a second Greek bailout and the U.S. economy showed signs of gathering strength.
For more: Nordic Currencies Stung in Crisis - Bloomberg