Krona Strengthens as Riksbank Signals No More Interest Rate Cuts

Sweden’s krona strengthened the most in almost three weeks against the euro as the Riksbank signaled it may not ease policy further after today cutting interest rates for a fourth time in the past 12 months.

The krona climbed against all major currencies in a basket compiled by Bloomberg. It appreciated as much as 0.6 percent against the euro, the most since Nov. 28, and was up 0.3 percent to 8.7372 and 0.4 percent versus the dollar to 6.6322 as of 2:23 p.m. in Stockholm.

The Riksbank cut rates to 1 percent from 1.25 percent, in a move expected by 16 of 17 economists surveyed by Bloomberg, to revive growth as the largest Nordic economy succumbs to Europe’s debt crisis. It signaled it will probably keep the benchmark unchanged until the end of next year and sees the rate at 1.8 percent by the end of 2014.

“The money market had already priced a very high probability of an additional cut,” Kasper Kirkegaard, senior foreign-exchange strategist at Danske Bank A/S, said by phone from Copenhagen. “There had likely been added quite a bit of short Swedish krona positions going into the meeting. Part of that might also explain the strengthening of the krona.”

Sweden’s $540 billion economy, which relies on exports for about half its output, is struggling to expand as the debt crisis in Europe erodes demand for its goods.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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