Krona gains on franc as traders seek Germany without Greece

Sweden’s krona is joining the Swiss franc as a favored currency for traders seeking to profit from Germany’s economic expansion while avoiding the debt crisis roiling Europe.

The krona may climb to its highest level in more than 10 years against the euro as the fastest growth in Europe spurs the Riksbank to keep raising interest rates. It’s a cheaper way to participate in German growth than the traditional haven, the Swiss franc, which is the most overvalued currency against the euro and the dollar as measured by the relative cost of goods and services.

Sweden’s economy grew an annual 6.4 percent in the first quarter after last year’s 5.7 percent pace, the most in the region. Higher rates than in the euro area haven’t hurt exports fueled by Volvo AB and Ericsson AB. The krona is only “starting to approach” a “reasonable” level, central bank Deputy Governor Lars Nyberg said in an interview in Stockholm last week.

“The Swedish economy is in good shape,” said Paul Robson, a senior foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “If there is a deterioration in European financial stability then it’s realistic to believe that Sweden will do relatively better than Switzerland. Sweden is just as strong a safe haven as Switzerland.” RBS told its clients on May 6 to sell the franc against the krona.

KRONA GAINS
Sweden’s currency may climb 3.6 percent against the dollar and about 4.4 percent versus the euro this year, while the franc will probably weaken 9.4 percent by Dec. 31 compared with the greenback and slide 6.9 percent against the European common currency, according to median forecasts in surveys of analysts.

Investors are betting the pace of the krona’s appreciation against the euro may start to gain on that of the franc, which has climbed more than 14 percent versus the common currency over the past year, according to data compiled by Bloomberg. The krona, which rose 5.5 percent, was the second-best performing major currency versus the euro, the data show.

The Swedish currency fell 3.1 percent to 6.3273 per dollar last week, retreating further from its near three-year high of 5.9789 per dollar on May 2. It was down 1.2 percent versus the euro at 9.0800. The franc declined 1.1 percent to 84.30 centimes per dollar and climbed 0.9 percent to 1.20978 against the euro. The krona was at 6.3514 per dollar as of 11:22 a.m. in London, while the franc traded at 83.73 centimes against the greenback.