Krona Weakens on Higher Probability of Rate Cut: Stockholm Mover

Sweden’s krona weakened to its lowest level against the euro in almost two months after the central bank left its benchmark interest rate unchanged for a second meeting and delayed tightening to the second half of 2014.

The krona depreciated as much as 1.1 percent against the euro to 8.4763, its weakest level since Feb. 25, and traded at 8.4685 as of 2:26 p.m. in Stockholm. It weakened as much as 1.5 percent against the dollar to 6.4615, its steepest daily depreciation in 11 months. The krona slipped against all the world’s 16 major currencies, including the British pound, the Swiss franc and the Japanese yen.

While the Riksbank left its benchmark interest rate unchanged at 1 percent, as expected by all 21 economists in a Bloomberg survey, it reduced its forecast for the benchmark rate to 0.9 percent for the first quarter next year from a previous assessment of 1.2 percent.

“With the signs of renewed concerns over international growth and more expansive monetary policy from international central banks we see a large probability that the Riksbank will cut rates again,” SEB AB said in a report today. “Even if it is far from a certain call, we have revised our forecast downwards and now predict a rate cut to 0.75 percent in July.”

SEB added that while the decision to keep the rate unchanged was widely expected, the repo rate path “was significantly more dovish than expected as it increased the probability for a rate cut in April” to 6.5 basis points from 5 basis points.

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