Swedish Finance Minister Anders Borg said the country would need to act should additional krona strength add to pain for exporters, sticking by comments made earlier this week that drew fire from opposition politicians.
“Given the slowdown in European markets, for us to stay competitive we need to think also about the currency,” Borg said today in a Bloomberg Television interview in Cape Town, South Africa. “The market should set the price of the currency, it’s a free floating currency, but we can’t ignore if there’s a potential risk for excessive movements in the markets.”
The krona has soared 28 percent against the euro since the end of 2008, sparking calls from exporters to stem its appreciation. While policy makers earlier this year said they were unconcerned about the ascent, they are now adjusting their stance as the currency has emerged as the second-strongest in the world, after the New Zealand dollar. Riksbank Governor Stefan Ingves acknowledged last month the strong krona had undermined the bank’s efforts to achieve its inflation target.
Borg earlier this week in an interview from Abuja, Nigeria, said the krona could potentially become an issue for the Riksbank, comments he defended today while voicing his support for the bank’s independence. The opposition Social Democrats yesterday criticized the minister for potentially interfering with the bank’s independence.
“I strongly support the central bank’s independence but we also have to have a discussion about where the currency is heading,” he said.
Borg last month cut his economic forecasts for 2014, citing the krona’s impact on exports and the labor market. The Riksbank on April 17 said it needs to delay monetary tightening plans until the second half of 2014 as it forecast price growth won’t reach its 2 percent target until 2015.
“I do think the krona is potentially becoming a little bit of a problem, so I think we have to watch it very carefully to see where it goes,” Borg said today. “I don’t think it’s dramatically off fair value today but if continues to move and we are becoming a safe haven it could potentially be a problem.”
Sweden generates half its economic output from exports, of which 70 percent are destined for Europe. The AAA rated nation emerged as a haven from Europe’s debt crisis last year, only to watch its currency appreciate more than most of its developed-world peers. The krona’s 6.6 percent gain over the past 12 months is the best performance in a basket of 10 developed-market currencies tracked by Bloomberg in the period, after the New Zealand dollar.
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