Tale of Two Inflation Reports as Nordic Currencies Diverge

Updated on
  • Norway's krone climbs from near 23-year low vs Sweden's krona
  • Norwegian consumer prices rise more than analysts forecast

Contrasting inflation reports pushed Nordic currencies in opposite directions on Thursday, stemming a decline that had driven Norway’s krone to a 23-year low against its Swedish peer.

Norway’s currency was bolstered after a report showed consumer prices climbed 0.4 percent in November, surpassing the 0.2 percent median estimate of economists in a Bloomberg survey. That move was compounded by data from Sweden which showed its inflation rate came in below analysts forecasts.

The data are key as investors look for signals before policy makers from both nation’s central banks meet next week. The drop in Swedish inflation could put pressure on Riksbank officials to consider lowering their key interest rate from minus 0.35 percent to stimulate price growth.

Norway’s krone has dropped against all except one of its 16 major peers during the past three months as a slump in commodity prices weighs on Europe’s largest oil producer. The drop in crude has prompted the Norges Bank to halve rates to 0.75 percent in the last year in a series of surprise decisions. Brent crude is near a six-year low.

“The most important thing for currency markets is CPI and its bearing on rate decisions next week” with the data increasing the likelihood of a rate cut from Sweden’s Riksbank, said Carl Hammer, chief currency strategist at SEB AB in Stockholm. “The currency market is only paying attention to spot inflation” rather than Sweden’s better economic performance relative to Norway’s, he said.

SEB’s Hammer predicts the Riksbank will cut rate by 10 basis points on Dec. 15. SEB is Scandinavia’s second-biggest currency trader after Nordea Bank AB, according to Euromoney Institutional Investor Plc’s 2015 foreign-exchange survey.

The Norwegian krone jumped 1.2 percent to 0.9815 Swedish kronor at 2:23 p.m. London time after dropping to 0.9624 on Dec. 8, the weakest level since 1992. The krone strengthened 0.5 percent to 8.6282 per dollar. Sweden’s krona tumbled 0.7 percent to 8.4696 per dollar.

The krona was the second-worst performer against the dollar among 16 major currencies tracked by Bloomberg on Thursday, while the krone’s gain followed advances by the Australian and New Zealand dollars.