[LINK] "Krona Rises on Franc as Traders Seek Germany Without Greece"

[rfmcdonald]

Using the Swedish currency as a proxy for the German says worrying things about the Euro and the German economy, but perhaps also for Sweden. Is the Swedish economy necessarily capable of supporting a highly valued currency? I hope so; it'd be an irony otherwise.

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, according to data compiled by Bloomberg. 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 5.7 percent last year, 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.”

[. . .]

The Swedish currency and the franc have benefited as Europe’s leaders led by German Chancellor Angela Merkel struggle to hammer out a second Greek aid package by the end of June.

Last year’s 110 billion-euro ($158 billion) rescue failed to prevent an investor exodus from Greece, which will have debt at 157.7 percent of gross domestic product this year, the highest level in the euro’s history, according to the European Commission on May 13. Ireland and Portugal also sought aid as record deficits sent borrowing costs soaring. Sweden is a European Union member that doesn’t participate in the euro.

“If you are buying the Swedish krona you are getting European growth without Greek politics,” said Nick Parsons, head of markets strategy in London at National Australia Bank Ltd. “You can make a solid case for the strength of the krona persisting and for it continuing to be one of the two strongest currencies in the world.”