SEK: The most undervalued G10 currency - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the Swedish krona is the currency that stands to benefit most from a global reflation theme being sustained through 2017.

Key Quotes

“In terms of the three spare capacity measures, SEK was 2nd in the wages measure, 3rd in the inflation measure and 4th in the unemployment measure. Based on the level of real yields in Sweden, we also judge the Riksbank to be running the most aggressively loose monetary stance in G10 while our internal MUFG valuation estimate puts SEK as the most undervalued G10 currency as well.”

“All of those factors combined leaves the Riksbank little room to maintain the current monetary stance and hence points to plenty of scope for SEK out-performance in 2017. The latest Riksbank policy announcement that resulted in a tapering of QE and divisions over the strategy suggests fading appetite in Sweden for aggressive monetary easing. We expect further evidence of that to emerge going forward.”