Krona Reaches Six-Year Low Against Euro as Negative Rates Repel

Sweden’s currency may continue to weaken after closing at a six-year low against the euro as the central bank is winning its battle to depress the currency, according to the Nordic region’s biggest currency trader.

“The arguments for holding krona are very, very weak, mainly because if you put money in a krona account you end up with negative interest rates,” said Carl Hammer, head of currency strategy at SEB AB in Stockholm. “The are also signs that the market is looking for carry” and “the krona appears as a funding currency candidate,” he said.

The krona traded as much as 0.7 percent lower against the euro following comments today from Riksbank Governor Stefan Ingves that that he remains determined if necessary to fight low inflation with more stimulus. He signaled that the Riksbank can’t just stand by if central banks abroad opt for more stimulus.

The currency traded at 9.6598 as of 5:05 p.m. in Stockholm, the lowest closing level in Stockholm since June 2010.

According to Hammer, slowing economic growth in Sweden and the risk of Donald Trump winning the U.S. presidential election in November means the krona could weaken to 9.80-10 against the euro later this year, although that is not the SEB’s main scenario. The krona has historically weakened amid a slowdown in the world economy.

“The krona will continue to be weak since the Riksbank will continue to clearly state that they can’t at all deviate from the ECB,” Hammer said.

Still, long-term investors should consider buying the krona given the strong fundamentals of the Swedish economy, he said.

Before it's here, it's on the Bloomberg Terminal.