And the U.K. may not be such a safe place after all.
So for risk-averse investors who expect the euro to FALL and want to maximize their investment returns, but don't want to go outside Europe itself, heading north to Sweden and Norway appears to be the only option. And it shows.
On Wednesday the euro was pushed down to both a 12-year low against the Swedish krona and a nine-year low against the Norwegian currency. Investment flows into the two Scandinavian countries have accelerated over the last couple of months as the crisis in the euro zone has continued to show little sign of an early resolution.
Over the last few days the flows have intensified further as recent economic data has suggested that the slowdown in most parts of the euro zone could be spreading to Germany as well, making the euro even less attractive.
In the past, euro bears may well have turned to the Swiss franc or even the British pound as an escape for the euro. But with the Swiss National Bank still pursuing an aggressive policy of capping the franc's rise against the euro and with the U.K. economy slipping back into recession this year, both the franc and sterling have lost some of their luster.
So, euro bears wanting to keep their money within Europe have seen the Scandies as the only alternative--both Sweden and Norway offer interest rates at a premium relative to the euro zone, with key rates in both countries at 1.5%, double the 0.75% on offer in the currency bloc.
Also, unlike the euro zone where most economies are contracting even more rapidly than expected, Sweden and Norway are still growing; the former by 2.3% in the second quarter of this year and the latter by 1.1% in the first.
Of course, both countries do remain vulnerable to events in the euro zone but as they tend to have close economic trading ties with Germany, which remains relatively strong, they are at less risk from the contraction affecting the peripheral members of the region.
With inflation in both countries remaining relatively subdued, there is a chance that the Riksbank in Sweden and the Norges Bank in Norway could cut interest rates in future.
It would certainly be in their interest to do that economically, to help boost domestic demand as well as reduce some of the upward pressure on their currencies.
However, as far as euro bears are concerned, the level of Scandinavian interest rates could well prove academic.
"Given the fact that Scandi strength seems to be the result of euro-zone capital flight, even strong verbal interventions and rate cuts may not reverse the tide," noted Josh O'Byrne, a currency strategist at Citigroup C -0.10% .
So, despite the gains that the krona and the krone have made against the euro already, bears could well keep the rallies going for some time to come.
(Nicholas Hastings is a Senior Correspondent in London for Dow Jones Newswires who has written about foreign exchange for more than 20 years. He previously covered a variety of markets, including equities, fixed income, commodities and energy. He can be contacted on +44-20-7842-9493 or by email: nick.hastings@dowjones.com or on twitter @NickHastingsDJ)
