Krona Jumps Most in 3 Months as Banks Scrap Calls for Rate Cut

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Sweden’s krona climbed the most since February against the euro as a surprise increase in consumer prices damped speculation central bank policy makers will cut interest rates deeper below zero.

The krona advanced against all of its 16 major peers as Nordea Bank AB, Svenska Handelsbanken AB, Swedbank AB and SEB AB all changed their forecasts to say that further measures from the Riksbank are now no longer likely in July. Policy makers have been struggling to prevent a deflationary spiral in Sweden, cutting the bank’s main rate to an unprecedented minus 0.25 percent and pledging to buy as much as 90 billion kronor ($10.9 billion) in government bonds.

“There was a modest upside surprise on the Swedish inflation print, so that was always going to help the krona,” said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London. “The scale of the reaction once again raises questions over the level of liquidity” in Scandinavian currencies. “We seem to be getting outsized reactions in foreign exchange.”

The krona strengthened 1.1 percent to 9.2511 per euro at 4:41 p.m. London time, the biggest advance since Feb. 25. The currency gained 0.4 percent to 8.2260 per dollar.

Swedish consumer prices rose an annual 0.1 percent in May, after falling 0.2 percent in April, data Thursday showed. Economists surveyed by Bloomberg predicted a 0.1 percent decline while the Riksbank foresaw unchanged prices.

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