Nordic Currencies Tank as Inflation Slowdown Saps Rate Bets

The currencies of Sweden and Norway slumped after reports showed inflation pressures eased in the largest Nordic economies, cooling bets that interest rates will rise.

The Norwegian krone lost as much as 1.2 percent versus euro, reaching the weakest level since Nov. 29, 2010. Sweden’s currency slid 0.7 percent to 8.8078 per euro.

A report in Sweden showed headline inflation unexpectedly held at 0.1 percent, when economists surveyed by Bloomberg had predicted faster price growth. Underlying inflation in Norway slowed more than estimated in September to 1.7 percent. Policy makers at both nations’ central banks last month kept rates unchanged and signaled higher rates next year.

The June 2014 future on the Riksbank’s main rate slid three basis points to 1 percent, signaling no change by then. The future traded as high as 1.2 percent in August.

Sweden’s Riksbank kept its repo rate at 1 percent last month, in part to avoid fueling household debt, and predicted it would raise rates late next year. At the same time, inflation has trailed the bank’s 2 percent target for 21 months. Norges Bank last month kept the main rate unchanged at 1.5 percent and signaled faster tightening as the krone weakened and house prices and consumer debt hover at record levels.

The annual rate in Norway, adjusted for taxes and energy prices, fell to 1.7 percent from 2.5 percent, Statistics Norway said in a statement on its website today. The rate was seen at 2.2 percent, according to a median forecast of 10 economists in a Bloomberg survey.

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