Introduction to USD/SEK Trading
About the USD
The dollar of the United States (sign: $; code: USD; sometimes abbreviated US$ and referred to as the dollar or US dollar) is the official currency of the United States of America and its colonies in compliance with the coinage act of 1792. One dollar is divided into 100 cents (symbol: ¢) or 1000 mills (for accounting and tax purposes; symbol: ¢). The 1792 coinage act established a decimal currency by making the coins of dollar, nickel, and penny. The act also created coins in dollars, half dollars, and quarters dollars.
About the SEK
SEK is the abbreviation in the foreign currency trade markets for the Swedish krona which is Sweden’s national currency. It is among the top currencies currently traded on the forex (fx) market worldwide. The currency is often referred to as the Swedish crown since krona, when translated to English, simply means “crown”.
Sweden has an export-oriented economy, and a weak crown has helped to bolster this against a backdrop of recession fears and tariff wars, as well as turning Sweden into a popular tourist destination.
Tips for Trading USD/SEK
The fluxes of the US national currency’s exchange rate with the Swedish crown are close in nature to the US dollar/Norwegian krone pair’s rotation. The fast and sharp fluctuations throughout the day define all trading commodities. As a result, the key characteristics of the USD/SEK pair are high uncertainty, which hits more than 500 points on average, as well as unpredictability.
One can exchange USD/SEK effectively and gain a high profit when implementing strategies in the short and medium-term. The USD/SEK is prone to differential monetary policy perceptions of Sweden’s Central Bank (the Riksbank), and the US Federal Reserve. In times of market stress, the dollar has also acted as a haven asset, meaning the USD/SEK exchange rate may be sensitive to swings in broad-based investor sentiment trends.
Sweden is a major exporter to the United Kingdom and the Eurozone, meaning trends in those markets will also affect market behaviour of the SEK. Sweden is spoken of as a benchmark for global growth. Sweden appears to be very strong in accepting technologies and this particular pair has a certain connection with the Nasdaq. With that in mind, you have to think of the Swedish krona as a “riskier” currency, because capital would flow out of the US to search for opportunities in prosperous yet fast-growing economies like Sweden. There’s also usually a differential interest-rate risk when it comes to this currency pair, as the US continues to have lower interest rates than Sweden and the rest of Scandinavia.
You must bear in mind, though, that this pair is particularly vulnerable to global risk, and this demand will most likely grow in times of economic uncertainty, just as it will collapse in favour of the Swedish crown in times of economic prosperity.
Economic Data that Influences USD/SEK
The economic developments affecting this couple are similar to several others. For example, interest-rate decisions from both the Federal Reserve and the Sverige’s Riksbank will have a significant effect on where this pair heads, as the interest-rate gap either widens or shrinks. Ultimately, global risk tolerance levels would usually be the pair’s greatest movers. Therefore, if the world’s financial markets are doing relatively well, the Swedish crown continues to perform reasonably well. Similarly, keep in mind that commodities can also be a measure of global risk appetite, so this pair also tends to go down as they go higher.
The Swedish trade flow is predominantly with the US, Denmark, the UK, Finland, Norway, and Germany. Sweden’s export sector has represented the focal point of economic growth in the country since the 1990s. Over time, the service industry has gained superiority over the more commonplace divisions of paper, pulp, and steel, consequently inducing a reduced amount of susceptibility to international fluctuations. The downside, however, is a reduction in the amount of money garnered from exports by the Swedish economy, while the price of imported goods has also increased.
This market will be influenced by such announcements on the GDP from Sweden, just as the US GDP will. Keep an eye on US job figures, and as demand becomes better, it’s fair to assume that foreign trading should surge as well. The United States is, after all, the growing target market and this helps corporate risk tolerance to grow as firms explore opportunities abroad.
As mentioned earlier, this pair would also usually do reasonably well if the NASDAQ climbs higher. It’s not a complete analogy, however, because capital often actually moves into US stock markets to escape other stock markets. You ought to see a general trend of stock market positivity to assume that the value of the Swedish krona would go up.
Average Spread on the USD/SEK
For this pair the distribution can be as high as 20 pips or more but the PIP value can be lower. This makes the USD/SEK a fairly liquid pair to exchange. It’s not exactly one you want to scalp but it’s more or less the sort of market for a swing trader, if not a kind of long-term market trader. While this is a market influenced by an appetite for global risk, the entire globe doesn’t necessarily trade it.
Liquidity is the primary explanation for the instability of currency pairs. A traditional theory states that: the higher the supply, the lower the price, and vice versa. Liquidity is the scale of the market’s supply and demand. This means the larger the supply and demand, the easier it is to push the price.
Owing to this law, we may infer that exotic currency pairs on the forex market are the most competitive since their liquidity is always smaller than that of big pairs.
Economically, the Swedish krona (SEK) had a rough 2019 as a result of Sweden’s Riksbank, deciding to delay the next interest rate hike. It dropped at its lowest rate against the United States dollar (USD) since 2002 – just 9.55 to the dollar. To boost consumer spending, the Riksbank has kept the country’s interest rate extremely low over the last few years.
Traders prefer to exchange more in particular months, and stay out of the market for other months. During holiday periods, the trading volume inevitably dries up. Therefore, the months which follow such a period witness comparatively more significant market activity.
In the month of August, most investors and Forex traders in Europe and North America go on holiday. That leads to a lesser volume of trading and significant price actions. For example, August 2008 was misleadingly good for the S&P 500 Index, up 1%. However, August 2010 was quite miserable for the S&P, dipping 4.5%. August 2011 was also miserable, with a plummet of nearly 10%. The month is characterised by sideways drifts and swings in momentum.
The optimal time to exchange is focused before and after economic releases. Most USD traders’ schedules approximately suit trading hours, concentrating their operations while London, Osaka, Shanghai, Hong Kong, Melbourne, New York, and Chicago stock markets, futures, and options are open to business.