The Swedish krone retreated sharply this week as problems in the country’s real estate sector continued. The USD/SEK pair jumped to a high of 10.35, the highest point since May 2 of this year. It has jumped by more than 2% from the lowest point this year.
SBB suspends dividend
The biggest news from Sweden this week was on Samhällsbyggnadsbolaget i Norden AB, also known as SBB. In a statement, the company announced that it will suspend its dividends in a bid to preserve cash as the Swedish real estate sector implodes.
The company decided to slash its payouts after S&P Global lowered its credit rating. It also canceled its capital raise program.
As I wrote in this article, the real estate sector is one of the biggest risks in the Swedish economy. After soaring in the past decade, house prices have tumbled this year as the Riksbank has hiked interest rates to deal with the elevated inflation.
There is a major risk that the property sector will come under pressure in the coming years as bonds worth over $40.5 billion mature. Most of this debt is a floating rate, meaning it changes as interest rates rise. Worse, house prices in Sweden have dropped by 15% this year, making it the worst performer in Europe.
The SBB share price has been in a major sell-off in the past few months. It has fallen by 70% from the highest point this year and has moved to the lowest point since March 2018. Also, the shares have fallen i the past four straight months. Other property stocks in Sweden have also retreated.
USD/SEK technical analysis
The USD to SEK exchange rate drifted upwards as investors reacted to the ongoing SBB woes. It moved to the highest point since May 2 of this year. The pair has moved above the 23.8% Fibonacci Retracement level.
It also jumped above the 25-period and 50-period exponential moving averages while the MACD has moved above the zero line. The USDSEK pair is also approaching the key resistance level at 10.35, the highest point in the final week of April.
Therefore, the USD/SEK will likely continue rising, with the next level to watch being at 10.50. A move below the support at 10.26 will invalidate the bullish view.
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