Let’s talk about SEK – and how to best trade in Scandi currencies

“We provide our clients with stable and reliable trading in Scandinavian currencies, in an otherwise volatile and increasingly erratic market”, says Andrew Tipper, SEB’s leading expert on spot trading of the Swedish krona (SEK).

An essential part of Andrew Tipper′s job description is providing clients the best price for the amount of SEK or NOK they are looking to buy or sell and helping them handle their Scandinavian currency risks.

In other words, he typically gets a call when a client needs SEK or NOK – to make a purchase on the Swedish or Norwegian market – or when a client needs to balance the books and avoid having too large volumes of SEK or NOK.

“Our list of clients is very diverse, containing all domestic client segments in Sweden, as well as major European, US or Asian based clients and banks. Basically, we provide our services to anyone with a vested interest in the Scandinavian currency markets”, Andrew says.

He stresses that the FX markets of recent years have tended to fluctuate a lot more and sometimes show erratic skips in pricing, which is especially true for smaller currencies. This turbulence is due to a lot of the spot trading having become automized. ?

“Many algorithms are triggered to act based on what’s happening in the market here and now. We, on the other hand, have a larger flexibility to manage our balance of risks, which means we can use a longer-term perspective and act based on our professional view of how these currencies will develop further down the road. The strength of our franchise supports our risk management, compared to direct market action. Therefore, we can offer more stable exchange rate spreads.”?????

He continues:

“For example, on days where clients are all trading the same way, we can absorb the increased supply and trade the risk around our own market view, minimising the overall footprint as we internalise as much as possible. On the daily trade we might see losses, but we are willing to take on that risk longer term, so as not to amplify the ongoing moves.

But not only are small currencies more sensitive to new trading patterns, they also suffer harder from global risk events. ??

When the train comes off the track

It is a well-known fact that the value of the Swedish krona has been spiralling downwards over the last decade, compared to the major currencies. While 1 EUR would cost approximately 9 SEK ten years ago, the current price is just short of 12 SEK. So, what is Andrew Tipper’s take on this development? ??

“When the train comes off the track, it derails most risk assets but tends to inflict more damage on smaller currencies. Put differently, when international turmoil occurs, like with the covid crisis and the Russian invasion of Ukraine, the players on the market start turning to what they perceive as safer alternatives. Gold and major currencies become favoured.”

The weak SEK also seems to have sparked new life to the Euro-debate in Sweden. As a leading SEK expert, what would happen to your job if Sweden decided to join the EMU?

“I don’t know, to be honest”, Andrew laughs. “I suppose I would have to spend a lot of time getting to know the next market.”

Understood, let’s not dwell on that. What is your message to anyone with a business interest in SEK or NOK?

“Trading in the small, Scandi currencies is best done with an in-depth understanding of the markets in question. We’re here to provide just that. In fair weather markets and especially in uncertain times we will always step up to the plate, to make sure we can continue delivering a smooth and reliable FX service.”

Learn more about SEB's FX services (sebgroup.com)