Nordic Currencies Weaken as ECB's QE Extension Disappoints

The Swedish and Norwegian currencies slumped after the European Central Bank added less stimulus than some traders had anticipated, easing pressure on policy makers in Oslo and Stockholm.

Sweden’s krona fell 0.5 percent against the euro to 9.2534 per euro as of 3:44 p.m. in Stockholm. The Norwegian krone declined 0.8 percent to 9.2579 per euro.

The ECB on Thursday lowered its deposit rate deeper into negative and said it would extend its quantitative easing program rather than increasing its size as some had bet on. That may ease pressure on the Riksbank as it seeks to keep a lid on the krona and revive inflation. Sweden in October expanded its quantitative easing program for a fourth time since February and has cut its main rate to minus 0.35 percent.

We still see a rate cut in December “but if the krona remains at current levels, the question is clearly whether it will happen,” said Carl Hammer, chief currency strategist at SEB AB, by phone. A lot could happen before the meeting on December 14, he said and if the krona is still over 9.20 per euro closer to that decision, “we will consider revising our forecast,” he said.

The krona’s development against the euro is “a bit troublesome,” Riksbank Deputy Governor Per Jansson said in a speech before the ECB’s decision was released.

Norway’s krone added to losses since last month. Central bank Governor Oeystein Olsen last month called the weak krone a “success,” and said in a speech on Thursday morning that a depreciation in the currency is a key way to help the oil-reliant nation withstand the drop in the price of Brent crude.

Olsen has halved rates to 0.75 percent in the past year and has signaled the possibility of more easing ahead.

“The decision from the ECB will on margin make it even less probable that we see a rate cut from Norges Bank,” said Frank Jullum, chief economist at Danske Bank A/S.

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