Sweden’s Krona Slumps as Rate Cut Bets Grow: Stockholm Mover
The krona fell 0.83 percent against the euro to 8.6093 and traded 0.9 percent lower at 6.6662 per dollar as of 2:28 p.m. in the Swedish capital. It slumped against all major currencies tracked by Bloomberg.
The krona “remains vulnerable after its strong third- quarter run,” said Kit Juckes, the London-based head of foreign-exchange research at Societe Generale SA, in a note today. “The rate support it enjoys has all but gone away.”
A survey released today showed Sweden’s services economy contracted in September, sinking at the fastest pace since August 2009. That came after a manufacturing survey earlier this week signaled a deepening contraction, as slumping demand from Europe endangers growth in the largest Nordic economy.
Overnight index swaps in Sweden showed a probability of 35.7 percent that the Riksbank will cut by a quarter percentage point later this month, up from 9.2 percent yesterday. By December, the probability of a cut to 1 percent has risen to 43.2 percent, according to OIS implied probability calculated by Bloomberg.
Policy makers, who cut rates last month for a third time since December to 1.25 percent, estimated then they will keep rates unchanged and then raise in a year as growth withstands a contraction in the euro area. The bank said its September cut was driven by the deepening debt crisis in Europe and a surge in the Swedish currency to a 12-year high against the euro.
The Riksbank’s next interest rate decision is scheduled to be announced on Oct. 25.
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