The Swedish krona fell to its lowest level against the euro since 2009, as concerns abound over the state of the nation’s economy.
(Bloomberg) — The Swedish krona fell to its lowest level against the euro since 2009, as concerns abound over the state of the nation’s economy.
The Scandinavian currency dropped as much as 0.5% to 11.4340 per euro. Investor concerns over the impact of a downturn in the domestic housing market have proved a drag on the krona, and could also limit the extent of the Swedish central bank’s hiking cycle, strategists argue.
“The path for rate hikes this cycle may be shallower versus other G10 economies,” Goldman Sachs strategists including Praveen Korapaty wrote in a note to clients. “In addition, depending on its view of the skew of the risks to the economy, the Riksbank may have a higher tolerance for inflation versus peers.”
The Riksbank is set to raise its key rate by 50 basis points on Thursday, according to a Bloomberg survey of economists. Policy makers have been vocal about the declining currency, with Governor Erik Thedeen saying that the weakening of the krona was “not welcome” in the fight against inflation during a parliamentary hearing on financial stability last week.
“A key driver for SEK will be where the forward guidance goes,” wrote Adam Cole, a currency strategist at RBC Capital Markets in a note to clients. “The risk of either a 25bp move this week or 50bp and dovish forward guidance leaves the near-term risk for SEK to the downside.”
–With assistance from Naomi Tajitsu and Greg Ritchie.
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