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Swedish Krona (sek) Vs. Us Dollar (usd)

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Swedish Krona (SEK) vs. US Dollar (USD)

For the past few years, the Swedish central bank has been lowering interest rates to the point of having the interest rate be below zero. As a consequence, we can observe a weakening of the SEK versus other currencies. Particularly the USD. The Swedish central bank has claimed that the main reason for lowering the interest rates to such an extent, and maintaining a negative interest rate is in order to reach their target inflation goal of 2%. An inflation goal of 2% is a proxy used by many central banks around the world as it is said to promote price stability which in turn facilitates a more stable economic growth.

I have decided to focus on the exchange rate between the two currencies between 2007 up until today. Looking at the graph, what is interesting to note is the behaviors of the currencies during ‘The great recession’ in 2008. It is evident that the SEK weakened substantially during this time period, from 1 USD getting you 5.834 SEK in April 22 2008, to 1 USD equaling 9.2863 in March 9th 2009. This is a very notable depreciation of the SEK and may be attributed to the fact that during times of economic instability, people tend to resort to stronger and more stable currencies, like the USD or the EUR. In the coming few years following the recession, the SEK found its way back to pre-recession levels for a brief moment of time. The most notable depreciation of the SEK vs the USD began in 2014, due to the monetary policies adopted by the central bank, as discussed in the previous paragraph. Last month, on March 10th 2019, the SEK reached its lowest point versus the USD in 17 years.

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