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Analysts at TD Securities suggest that with participation and liquidity only set to deteriorate further, they think the near-term risk/reward of engaging in SEK looks pretty poor right now.

Key Quotes

“With the Riksbank firmly on hold and lacking policy flexibility from here, we think the krona will be largely flow-driven for now with broader sentiment as the primary influence at the margin.”

“From a longer-term perspective, we think EURSEK (and NOKSEK) has had a solid run lower that is now looking rather long in the tooth.”

“We cannot declare with much confidence that the mid-December lows above 10.40 represent the trough for this cycle. We do, however, think the cross may struggle to challenge 10.3776 unless a significant new catalyst emerges.”

This leaves us better buyers of dips going forward, but we are content to remain on the sidelines until activity picks up again in the New Year.