The fear of debt contagion spreading across the more fragile nations within the euro zone has begun to affect its regional neighbors to the north. The economies of Sweden, Norway and Denmark have all been bulwarks of stability during the economic crisis of the past several years. While this sentiment does not appear changed, the short-term impact of a debt fear and lowered consumer confidence has been to place an added weight to the value of the rising kroner of Scandinavia.
The Norwegian krone (NOK), as the first example, has been affected by stock prices seen in decline for several of its major companies, particularly in the telecommunications and technology fields. Climbing oil prices these past few days have also dragged on the NOK as it is commonly tied with the value of oil; Norway being a heavy exporter of crude oil.
Sweden’s currency woes are perhaps less severe, given a recent hike in interest rates by the Riksbank to 2% from 1.75%, but this week’s modest downtick has Swedish ministers noting the impact euro zone debt fears are having on regional growth at a more macro level. Bank governor Anders Borg has cemented his role as a fiscal conservative, however, taking lessons from Sweden’s financial crisis of the early 1990s to implement steps aimed at shoring up Sweden’s growth potential through 2015.
Denmark, too, has had its currency (DKK) affected by regional woes, but appears a formidable stalwart in a region relatively shaken by Greece’s debt concerns. The Scandinavian kroner may be in a mild downturn this week, but sentiment remains optimistic for the northerly region. Traders may want to anticipate the price shifts as risk sentiment is priced in, but take heed of the notion that Scandinavia is significantly more stable than its southerly counterparts.
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