Although Sweden’s exchange traded fund iShares MSCI Sweden Index (EWD) has a reputation for strong fiscal discipline, it’s still susceptible to economic influences such as rising interest rates. Sweden’s Riksbank recently increased interest rates by a quarter point to 3.75%, which is the ninth tightening since January 2006, reports Jonas Bergman for Bloomberg. On Thursday, the Swedish government downgraded its economic forecast for its gross domestic product (GDP) to 3.2% for this year and next. The original prediction in April expected the the economy to grow 3.7% this year and 3.3% next year, according to the Associated Press. These revised expectations are another factor that could influence EWD’s performance. Currently, EWD is up 11.7% year-to-date.

What could be saving EWD is the fact that it is full of top global companies that trade at attractive valuations. The top holding in EWD is the telecom equipment-maker Ericsson, which accounts for 16.0% of the basket. Ericsson has a 25% return on equity and a much stronger balance sheet than its peers, says Carl Delfeld for ETF XRAY. Other top companies in the Sweden ETF include Sandvik, Volvo and Atlas Copco.

Investors interested in currency ETFs can buy the Swedish krona through the CurrencyShares Swedish Krona Trust (FXS).

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

Tags: Currency ETFs, EWD, Sweden