Jens Nordvig and his team at Nomura International Securities have shorted EUR/SEK [euro/Swedish krona] in their model portfolio.
They gave two reasons.
One, the European debt crisis is “back on the markets’ radar,” as evidence by EUR/USD’s decline last Friday on a report (later denied) that Greece was considering leaving the euro and the further decline on Monday after S&P downgraded Greece.
Given the now-bearish outlook on the euro, traders are looking for ways to short it.
Shorting it against a European currency is attractive because it’s close to a pure-play on the euro’s weakness and less likely to be derailed by an exogenous factor.
Two, the market has only priced in three more interest rate hikes for the Riksbank [the central bank of Sweden] in 2011.
While that view is in line with Nordvig’s expectations, the “the risks remain on the upside and hence there is now some room for rates pricing to re-price some hikes as economic data remain strong and inflation expectations continue to edge higher.”
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