Sweden's Krona Advances After Riksbank Restates It May Boost Rates in July

Sweden’s krona rose against the euro after the country’s central bank repeated that it may increase interest rates as early as July.

The Swedish currency gained for the sixth day after the Riksbank said that it would “gradually move towards a more normal monetary policy.” Sweden’s central bank kept the benchmark repo rate unchanged at 0.25 percent, as predicted by all 19 economists surveyed by Bloomberg.

“Some are taking consolation in the idea that the Riksbank is getting close to raising rates, strengthening the krona,” said Carl Hammer, a currency strategist at SEB AB in Stockholm.

The krona increased 0.3 percent to 9.6533 per euro at 11:05 a.m. in Stockholm. Sweden’s currency also climbed 0.3 percent versus the dollar, to 7.1552. It will trade at 9.5 per euro by the end of June, Hammer said.

“The financial markets are more stable now and the recovery in the economy is continuing,” the Stockholm-based Riksbank said in a statement on its Web site following the decision. “The Executive Board’s assessment is that it will begin to increase the repo rate in the summer or early autumn.”

Policy makers have rate meetings scheduled in July and September.

The bank kept its rate forecast of 1.1 percent in the first quarter of 2011 and 2.8 percent in the same period of 2012, according to the statement. The bank cut its outlook for economic growth in 2010 to 2.2 percent, from 2.5 percent, and increased its 2011 forecast to 3.7 percent, from a prior estimate of 3.4 percent.

By reiterating the rate outlook the bank will give traders a reason to buy the krona again because the market had priced in fewer rate increases than the Riksbank forecast, Stefan Mellin, a currency strategist in Stockholm at Danske Bank A/S, said yesterday. The two-year swap rate in the krona versus the euro was at 1.61 percent today.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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