What is NOK/SEK?
The NOK/SEK forex pair shows how much the Norwegian krone (NOK) is worth against the Swedish krona (SEK). The pair is commonly used by individuals, businesses, and investors who are involved in currency trading or cross-border transactions between Norway and Sweden, both of which are affluent Scandinavian countries.
The Swedish krona, abbreviated as SEK, was first introduced in 1873 as part of the Scandinavian Monetary Union, a currency agreement that included Norway and Denmark. This monetary union remained in effect until World War I. Subsequently, in later years, Sweden faced the prospect of joining the eurozone and adopting the euro as its official currency. However, most of the Swedish population expressed strong opposition to this currency transition, preferring to retain the krona as their national currency. The krona is regulated by Sweden’s central Bank, Sveriges Riksbank.
Norway is a leading oil exporter in Western Europe, funding a substantial portion of its budget from oil revenues. The value of the Norwegian krone is therefore linked to the price of crude oil, and it is controlled by the country’s central bank, the Norges Bank.
What affects the price of the NOK/SEK pair?
Like any other currency pair, the price of NOK/SEK is influenced by a variety of economic and political factors that include:
- Oil Prices: Both Norway and Sweden are major oil producers. Fluctuations in oil prices can directly affect the Norwegian economy and, consequently, the value of the Norwegian krone.
- Central Bank interest rates: Sveriges Riksbank and Norges Bank set their respective interest rates. Higher interest rates tend to attract foreign investors seeking better returns, leading to increased demand for the currency with the higher interest rate. This can cause the value of that currency to appreciate relative to the other currency in the pair.
- Economic data: Economic indicators such as Gross Domestic Product (GDP) growth, unemployment rates, inflation, and trade balances can impact the perceived strength of each country's economy. Strong economic data might lead to a stronger currency.
- Geopolitical events: Events such as international conflicts, trade disputes, and geopolitical tensions can impact investor sentiment and lead to currency fluctuations.
- Political stability: Both Sweden and Norway are known for being affluent, democratic countries and among the most politically stable countries in the world. Political instability, stemming from contentious immigration policies in both countries, for example, has the potential to erode investor confidence, triggering capital flight and subsequently weakening the currency.
- General market sentiment: Trader sentiment, market speculation, and investor behaviour play a significant role in short-term currency movements. Positive or negative news about either country can influence trading decisions.
What to watch out for when trading NOK/SEK?
When trading the NOKSEK forex pair (Norwegian krone against the Swedish krona), there are several factors to watch out for. Here are some key considerations:
- Organization of the Petroleum Exporting Countries (OPEC) meetings and oil inventory data
- Monetary policy decisions and announcements by the Sveriges Riksbank and Norges Bank
- Sweden and Norway’s Inflation figures as shown in the Consumer Price Index (CPI)
- Sweden and Norway’s Employment Data, GDP, and Trade Balance