SEK (Swedish Krona): What it Means, How it Works

What Is the SEK (Swedish Krona)?

In the foreign currency exchange marketplace, SEK is the abbreviation for the Swedish krona which is the national currency of Sweden. It is among the top currencies currently trading in the world Forex (FX) market.

Understanding the SEK (Swedish Krona)

The krona, which means crown in Swedish, has been Sweden's currency since 1873 and is also expressed by the symbol KR. It replaced the Swedish riksdaler. One krona comprises 100 öre. Sweden abandoned the öre coin, so prices are typically rounded up to the nearest krona. One of its nicknames in Sweden is the spänn.

The exchange rate of SEK depends heavily on the monetary policy of Sweden. The country's central bank is known as the Sveriges Riksbank, the world's third oldest bank, and the oldest central bank. In 1992, Sweden implemented a floating exchange rate for SEK, and it has been allowed to float against other currencies since then, with the Sveriges Riksbank occasionally intervening to stabilize the krona.

SEK has a strong currency correlation with the currencies of other Nordic countries, such as the Danish krone (DKK) and the Norwegian krone (NOK). While most countries in the European Union have adopted the euro, Sweden, like Denmark and Norway, is one of a handful of EU member nations that have opted to maintain their legacy currencies.

Even though the Treaty of Maastricht holds Sweden responsible for eventual conversion to the euro, a referendum in 2003 found 56% of voters opposed the new currency, and the country has since held off joining by avoiding specific necessary monetary requirements that would require it.

The government has said it will not bring a new referendum on the issue until it has sufficient popular support, but the appetite for the euro has only decreased. Although there is still occasional debate on the subject, it appears there are no plans for conversion anytime soon. EUR/SEK is Scandinavia's most significant exchange rate.

SEK as a Safe-Haven

Despite Sweden's relatively small economy, its well-educated and tech-savvy workforce and the fact that it is home to many multinational corporations have led many forex observers to classify SEK as a safe haven currency. A safe haven is expected to retain or increase in value during times of market turbulence.

Still, global uncertainties, especially during threats of an international trade war, have led to some losses for the safe-haven krona over the last four years. A looser economic policy has led to overall weakness in the Swedish krona in the four years from 2015 to 2019. Although many expect the krona to eventually rebound strongly, some have called for a switch to the euro given the krona's global sensitivity.

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