April 16 (Bloomberg) -- Sweden’s krona declined to the weakest level in almost two years against the euro amid speculation the nation’s central bank will cut interest rates at least once this year, damping demand for the currency.
The krona fell against all but one of its 16 major peers, while Sweden’s two-year yield was about three basis points from the lowest level since October 2012. Riksbank policy makers kept the main interest rate at 0.75 percent on April 9, with two of the six board members voting for a cut to 0.5 percent. A government report the next day showed annual consumer prices dropped 0.6 percent in March, the most since 2009 and twice as much as economists predicted.
“It’s all about the Riksbank,” said Carl Hammer, chief currency strategist at SEB AB in Stockholm. “The market is readjusting to the possibility of at least one rate cut.”
The krona slid 0.4 percent to 9.1162 per euro as of 4:14 p.m. London time after touching 9.1166, the weakest since May 2012. It depreciated 0.4 percent to 6.5982 per dollar.
Sweden’s currency will decline to 9.15 per euro within three months, SEB’s Hammer said. There are “upside” risks to that forecast, he said, referring to the possibility the krona may weaken further.
The krona has fallen 4.1 percent in the past three months, the worst performer in a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
The yield on Swedish two-year notes rose two basis points, or 0.02 percentage point, to 0.65 percent today. The rate fell to 0.629 percent yesterday, the least since Oct. 4, 2012.
To contact the reporter on this story: David Goodman in London at firstname.lastname@example.org
To contact the editors responsible for this story: Paul Dobson at email@example.com Keith Jenkins, Nicholas Reynolds