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Sweden’s Krona Slumps as Rate Cut Bets Grow: Stockholm Mover

Oct. 3 (Bloomberg) -- Sweden’s krona was the worst performing major currency against the euro and the dollar amid rising speculation the central bank will cut interest rates again at the end of the month.

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.

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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