Even the most diligent forex traders would probably have difficulty distinguishing the Swedish Krona from the Norwegian Krone. Given current market conditions, such a distinction may no longer be necessary. Despite important differences in the structure of their respective economies, both currencies have moved in lockstep and fallen drastically, as a result of investor risk aversion associated with the credit crisis. The Norwegian Krona has been singled out especially due to the decline in the price of its most important export: oil. Despite sluggish growth, however, both Sweden and Norway expect to report large current account surpluses in 2009. In addition, inflation in both countries is practically non-existent. It is no surprise, hence, that both fundamental and technical indicators signal that the Krona/Krone are grossly undervalued. Bloomberg News reports:
Based on purchasing-power parity, which measures the relative level of currencies based on the cost of goods in different countries, the krone and krona are the only ones undervalued versus the dollar among their eight most-traded peers, according to data compiled by Bloomberg.
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