Aug. 1 (Bloomberg) -- Sweden’s krona surged, posting the biggest gains of all major currencies, after a report showed manufacturing unexpectedly expanded, damping speculation the Riksbank will cut interest rates at its meeting next month.
The krona rose as much as 0.8 percent to 8.2979 per euro, the highest since Sept. 11, 2000, and was up 0.5 percent at 8.3217 as of 1:15 p.m. in Stockholm. It surged almost 0.9 percent against the dollar to 6.7411, a three-month high. It gained against all 16 major currencies tracked by Bloomberg.
An index based on responses from purchasing managers rose to a seasonally adjusted 50.6 in July from 48.4 the previous month, Stockholm-based Swedbank AB said today. A reading above 50 signals an expansion. It was estimated to drop to 47.7, according to the median estimate in a Bloomberg survey.
“Following the surprisingly strong GDP number Monday this gives further ammunition for unchanged Riksbank rates at the September meeting and lends additional support to krona appreciation,” said Claes Maahlen, head of trading strategy at Svenska Handelsbanken AB in Stockholm, in a note today.
Sweden has been able to avoid a recession this year as companies such as retailer Hennes & Mauritz AB and Sandvik AB have benefitted from demand outside Europe and as the central bank cut interest rates. The economy expanded 1.4 percent in the second quarter as increased exports of services offset a decline in the export of goods. Consumer spending also rose.
The yield on Sweden’s two-year notes increased three basis points to 0.9 percent.
After two interest rate cuts, the Swedish central bank has kept rates unchanged since February as it weighs economic strength at home with a potential recession in the euro area. The Nordic country’s $500 billion economy generates about half its output from exports, of which 70 percent go to Europe.
Swedbank’s production sub-index rose to 54.0 from 50.9 while the order index rose to 51.2 from 46.4. The employment index increased to 47.7 from 46.7 and the delivery time index advanced to 46.9 from 46.8.
“The Riksbank may take this as another sign that they won’t have to lower rates in September,” said Roger Josefsson, chief economist at Danske Bank A/S in Stockholm.
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