Trade fears weigh on Swiss franc and Swedish krona

Both the Swiss franc and the Swedish krona have depreciated by almost 1.5% against the euro over the past month. This has left the franc trading at its weakest level since the Swiss National Bank abandoned its cap on the exchange rate just over three years ago and the krona at its lowest rate against the single currency since late 2009. Their falls have not reflected shifts in relative interest rate expectations. Instead, given the openness of the Swiss and Swedish economies, the recent escalation of trade tensions between the US and China and fears that this could evolve into a broader trade war seem to be weighing on both currencies. In Sweden, the softer tone of the business surveys and weaker-than-expected inflation may also have cemented some investors’ views that interest rate rises are a long way off. Admittedly, Norway’s currency has not depreciated by much despite the fact that its economy is also very open. But in this case, the rise in oil prices and signs from the Norges Bank that it is contemplating tightening monetary policy appear to have supported the krone.