Sweden’s krona strengthened the most in two months against the euro after the Riksbank unexpectedly kept its key interest rate unchanged.
The krona climbed against all 16 of its major peers after the nation kept the repo rate at minus 0.25 percent on Wednesday, compared with the reduction to minus 0.35 percent predicted in a Bloomberg economist survey. The central bank said borrowing costs “may be cut further” while announcing it would extend its quantitative-easing program by purchasing 40 billion krona ($4.8 billion) to 50 billion krona of additional bonds. A currency tends to depreciate when more money’s in circulation.
“We’ve been a little bit surprised by the market reaction because, while they failed to deliver a rate cut, they did expand the QE program by more than we were expecting,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “They’ve firmly left the door open to further rate cuts,” which could be carried out “intra-meeting,” before the next scheduled policy gathering, he said.
The krona rose as much as 1.2 percent and was up 0.8 percent at 9.2754 per euro as of 4:31 p.m. London time, its third consecutive day of gains. It surged 2.3 percent to 8.3227 to the dollar, extending its earlier advance after a weaker-than-forecast U.S. growth report.
Sneyd said the Riksbank would be “very committed to preventing a strengthening of the currency,” adding that a rally to 9.1-9.2 per euro may prompt it to intervene.