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Swedish Krona Gains After Riksbank Raises Rates, Upgrades Economy Outlook
The krona rose against the euro and the dollar after Sweden’s central bank increased the benchmark repo rate a quarter percentage-point to 0.75 percent and said the economy continues to show “strong growth.”
The krona gained for the third day against the common currency as the Riksbank raised its forecast for economic growth in 2010 and said labor markets have improved “substantially.” The rate increase, the second since the end of June, was forecast by 16 out of 21 economists surveyed by Bloomberg. The central bank kept its rate forecast from July.
“Same rate path, higher GDP forecast and little concern about the U.S. economy; the Riksbank delivered on the hawkish side,” said Arne Lohmann Rasmussen, head of currency research at Danske Bank A/S in Copenhagen. “We’ll see more interest in the krona.”
The krona rose 0.3 percent to 9.3071 per euro as of 5:36 p.m. in Stockholm. It climbed 0.5 percent in August, the fifth consecutive monthly gain. Sweden’s krona gained 0.5 percent to 7.2577 per dollar.
The currency will strengthen beyond 9.3 per euro “shortly,” Rasmussen said. The krona will gain to 9.27 per euro by year-end and 9.21 by the end of June, 2011, according to the median estimate of 16 analysts surveyed by Bloomberg.
The Stockholm-based bank raised its gross domestic product forecast to 4.1 percent in 2010 from a July estimate of 3.8 percent, it said in a statement on its website.
“The Swedish economy has developed strongly so far this year,” the bank said. “The repo rate needs to be raised gradually towards more normal levels to attain the inflation target of 2 percent and create the right conditions for stable growth in the real economy.”
“The krona bulls are emboldened,” said David Deddouche, a foreign-exchange strategist at Societe Generale SA in Paris. “To me it’s mostly a non-event in the sense that we’ll have to wait for the next meeting to know if they stay on the tightening course or not.”
To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net
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