Sweden's Krona Slides Past 10 Per Euro as Low Rates Erode Appeal

  • Scandinavian currencies hurt by thin liquidity into year-end
  • Swedish interbank rates at record lows as lenders cut cash

Sweden’s krona weakened beyond 10 per euro for the first time in a year, on track for the worst quarter since 2014, as the nation’s record-low interest rates eroded the currency’s appeal.

The krona was also weighed down by the prospects of seasonal weakness due to a typical dwindling of market liquidity toward year-end and concerns about Sweden’s housing-market weakness. The nation’s interbank rates extended declines this month partly as banks sought to reduce excess cash holdings into year-end to limit a fee they must pay to the government.

“Falling rates are just another argument not to be long the Swedish currency currently,” said Magne Ostnor, a strategist in Oslo at DNB Bank ASA. “Any interest in shorting euro-krona has to weighed against the cost of placing these kronor at very low rates over the turn of the year.”

The krona fell as much as 0.6 percent Tuesday to 10.0169 against the euro, the weakest level since November 2016, taking this quarter’s declines to 3.9 percent. It pared losses to trade at 9.9700 as of 11:14 a.m. in London. Norway’s krone dropped as low as 9.7974 against the common currency, approaching a 35-month low of 9.8004 reached on Nov. 15, before rebounding to 9.6906.

“Institutional investors have got burned on both Scandinavian currencies this autumn, which probably limits their appetite for them into year-end when liquidity worsens,” said Martin Enlund, an analyst in Stockholm at Nordea Markets. “The next level that’s being watched by traders is probably around 10.08” in the euro-krona pair, he said.

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