Swedish Krona Slumps on Speculation Riksbank Will Cut Rates

Sweden’s krona slid to more than a two-month low against the euro after a report showed unemployment unexpectedly rose in March, boosting speculation the central bank will need to cut interest rates.

The krona slid 0.5 percent to 8.5777 against the euro as of 12:46 p.m. in Stockholm, the lowest since Feb. 12. Against the dollar, it fell 1.2 percent to 6.6083. It was the worst performer against the dollar, euro and yen.

Seasonally adjusted unemployment rose to 8.4 percent from 8.2 percent the prior month, Statistics Sweden said today. The rate was predicted to stay unchanged, according to the median estimate in a Bloomberg survey. The central bank last week pushed back the timing of its next rate rise by about a year to late 2014, citing a strengthening krona and inability of companies to raise prices because of weak demand.

“Growth in the economy is simply too low to keep unemployment stable,” Torbjoern Isaksson, an economist at Nordea Bank AB, said in a note. Rising unemployment “increases pressure on the Riksbank to cut rates” even as the “probability is still higher for the Riksbank staying on hold” at its next meeting in July, he said.

Ericsson AB, the world’s largest maker of mobile phone networks, and truck maker Volvo AB, are among exporters who have announced they will cut jobs. Sweden sells about half of its output abroad, of which about 70 percent go to Europe where countries are cutting spending to reduce debt.

The government last week announced more spending on infrastructure and education over the next two years to boost growth and cut unemployment.

Finance Minister Anders Borg estimates Sweden’s jobless rate will rise to an average 8.3 percent this year from 8 percent in 2012. Growth will pick up to 1.2 percent this year from 0.8 percent in 2012, he forecasts.

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