Sweden's Krona Drops From 9-Month High After Riksbank Pledgeby and
Sweden’s krona fell from a nine-month high versus the euro after Riksbank Governor Stefan Ingves said officials are ready to intervene in the foreign-exchange markets to limit the currency’s appreciation.
"If the exchange rate strengthens earlier and more rapidly than forecast, it will be more difficult to push up inflation towards the target," Ingves said in a statement. "The Riksbank is therefore highly prepared to intervene on the exchange market whenever we deem it necessary."
According to Nordea analyst Martin Enlund, the unscheduled statement suggests alarm within the central bank at the pace of krona gains over the past two weeks.
The krona weakened 0.38 percent to 9.1922 per euro as of 2:53 pm Stockholm time Wednesday, after appreciating to 9.1213, the strongest level since March. It slipped 0.36 percent to 8.4132 to the dollar, after approaching Tuesday’s two-month high of 8.3237. Sweden’s currency is still headed for an almost 3 percent advance against the euro this year, its first gain since 2012.
“The risk of intervention increases substantially if the euro-krona falls below 9” before inflation approaches its target, said Carl Hammer, chief foreign-exchange strategist at SEB AB in Stockholm. The krona’s gains have been “driven by a generally positive outlook for Sweden,” he said.
The Riksbank’s sole mandate is to keep inflation at about 2 percent. Despite unprecedented stimulus and rates well below zero, price growth has been negligent for the past three years.
The last time the Riksbank intervened in the currency market was in 2001, a time when inflation was above its target and the krona was weakening, Hammer noted.