Whilst we are long-term SEK bulls (and project a 5-6% trade-weighted appreciation over the coming 1-2 years) we see several short-term risk factors which may weigh on the Swedish currency. On Friday a strong non-farm payrolls report (SEB expects 190k) may well put Fed tapering back on the agenda likely to give some tail-wind for the dollar. On Monday Dec 9th, the annual Swedish PPM (pension) flows are due where SEK 10-20bn will have to be exchanged for FX. Despite very strong business and consumer barometers lately, SEB still expects Riksbank to lower rates on Dec 17th (although we have to admit it is still a very close call). Finally on Dec 18th, again likely dependent on the upcoming payrolls report, there is a clear risk Fed will announce a cautious scale-back of current asset purchases. To cover these risk events we propose buying a 6.70 USD/SEK one-touch, expiry Dec 20th, cost is approx. 25% of notional pay-out.
SEB