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Sweden's Krona Looking Hot

Ryan McVay | Getty Images

Tough talk from interest-rate hawks has sent the Swedish krona sharply higher.

How much further can it go?

The Swedish krona hit a two-year high against the dollar Mondayafter the government released the minutes of the latest central-bank policy meeting. One bank governor said that given Swedish inflation and rapid economic growth, there is an increased chance that the bank will have to raise interest rates at every meeting this year—and two said they might think of raising rates by as much as 50 basis points at a meeting.

That's good news for a currency, right? Well, yes—as long as those possibilities aren't already factored in by traders. Jens Nordvig, head of currency strategy at Nomura Securities in New York, told me he likes the outlook for the krona now, given his forecast of 4.5 percent economic growth this year and 2.5 percent next, but he'd wait for a little pullback to get in. The krona's 1.5 percent move today was pretty big for a currency with annual volatility of 6.5 percent, he pointed out. Nordvig suggests an entry point of 8.80 EUR/SEK, and expects a move from there to 8.60.

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