Krona Rises as Swedish Outlook Feeds Best Gains: Stockholm MoverJohan Carlstrom and Niklas Magnusson
The krona rose to its strongest level against the euro since September as economic data suggested Sweden’s recovery is gathering pace and after policy makers made clear they won’t stem the currency’s ascent.
The krona advanced as much as 0.4 percent against the euro and traded 0.3 percent higher at 8.3348 as of 1:38 p.m. in Stockholm. It’s the best performer in the Bloomberg Correlation-Weighted Index that tracks 10 developed-nation currencies, having gained 4.6 percent this year.
Swedish policy makers have said they won’t be dragged into currency wars, prompting Danske Bank A/S yesterday to publish a note predicting further krona appreciation. Finance Minister Anders Borg pledged yesterday not to interfere with the exchange rate, while central bank Governor Stefan Ingves said last month the krona’s ascent has brought it to a level he’s “happy” with. At the same time, economic data suggest Sweden’s recovery is gaining strength. The services sector expanded for a second month in February, a report showed today.
“We’re in a situation where most things are heading in the right direction,” Carl Hammer, chief currency strategist at SEB AB in Stockholm, said by phone. “We’re in a strong strengthening trend and in the fairly near future, it’s in the cards that we will test the 8.25 to 8.20 range” against the euro, he said.
Swedish debt yields also gained today as the recovery outlook brightened. The nation’s two-year note yield rose four basis points to 1.18 percent, its highest since April.
The yield on the 3.5 percent bond due 2022 rose seven basis points to 1.97 percent, widening the spread to similar-maturity German bunds to 53 basis points, the biggest yield difference since 2004.
Swedish consumer confidence improved for a second month in February, rising to minus 1 from minus 2.9 the previous month, the Stockholm-based National Institute of Economic Research said on Feb. 22. A manufacturing confidence index rose to minus 11 from a revised minus 17.
Improving consumer and manufacturing confidence and an expanding services industry have eased pressure on the Riksbank to cut rates further, underpinning gains in the krona.
Sweden’s central bank refrained last month from a rate cut that had been predicted by nine of the 22 economists surveyed by Bloomberg. The bank’s six-member board agreed to leave the main repo rate at 1 percent after cutting it four times since December 2011.
The krona has gained about 6 percent against the euro in the past 12 months, and is up 4.5 percent against the dollar in the same period.
Prime Minister Fredrik Reinfeldt said last week exporters must learn to adapt to the strong currency and find other ways to stay competitive.