Swedish central bank Governor Stefan Ingves said a 22 percent surge in the krona against the dollar in the past year marks a “normalization” that won’t harm exporters, signaling the bank isn’t planning to adjust policy to prevent further appreciation.
“As far as we can see, we’re going to have a very large current account surplus for the foreseeable future, so when it comes to the exchange rate, we’re seeing a normalization rather than an excessive appreciation,” Ingves said yesterday in an interview with Bloomberg Television’s Andrea Catherwood. Asked whether he’s concerned about the impact of an appreciation on exporters, he said “no, we are not.”
The bank raised its benchmark repo rate yesterday for a seventh time in a year, bringing it to 2 percent. Ingves reiterated the Riksbank’s commitment to continued rate increases as Sweden withstands the fallout of the euro area’s debt crisis and delivers one of Europe’s fastest economic rebounds.
The krona rose 0.2 percent against the euro to 9.0560 and was trading 0.1 percent higher versus the dollar at 6.2836.
The largest Nordic economy, which sent 44 percent of its exports outside the European Union in May, is unlikely to be hurt by the debt crisis engulfing economies on the euro region’s periphery, Ingves said.
“Before we really get affected, many other countries would be affected before us,” he said.
Sweden’s economy grew an annual 6.4 percent in the first quarter after surging 7.7 percent in the final three months of 2010, the statistics office said on May 27. The country has posted trade surpluses every year since 1983.
The krona’s appreciation has yet to suppress export demand.
Sweden’s SKF AB, the world’s largest maker of ball bearings, reported record quarterly profit at the start of 2011 as sales to all regions grew. Volvo AB and Scania AB, two of Europe’s biggest commercial-vehicle makers, also said profits surged as heavy-truck demand rebounded.
The krona, which has gained 6.3 percent against the euro in the past 12 months, is unlikely to continue appreciating at the same pace, Ingves said.
“The significant strengthening of the exchange rate is behind us,” he said at a press briefing after yesterday’s rate announcement. Given a “certain interest rate spread” against the euro area and the U.S. over the “next few years,” the krona “will be pretty stable,” he said.