The Swedish krona rose to the strongest since October 2000 against the euro as signs the European debt crisis is worsening increased demand for assets outside the single-currency region.
The krona rose for a fourth day versus the 17-nation euro amid speculation the Riksbank will refrain from halting gains in the currency of the largest Nordic economy. Central bank Governor Stefan Ingves said the krona may strengthen “given the economic developments in Sweden,” according to minutes of the July policy meeting released this week.
“The minutes were perhaps a little less dovish than some had expected but to my mind it isn’t a Sweden story,” said Christian Lawrence, a currency strategist at Rabobank International in London. The krona is benefiting from “diversification and recycling out of the euro. Although Sweden is a small open economy that exports a lot to the euro zone and is by no means immune to the crisis, it is in good fiscal shape.”
Sweden’s currency appreciated 0.6 percent to 8.4488 per euro at 3:18 p.m. London time after rising to 8.4412, the strongest since Oct. 24, 2000. The currency rose 1.9 percent this week, the most since the period ended Dec. 2. The krona fell 0.4 percent to 6.9494 per dollar.
Spain said today the recession will extend into next year as the region of Valencia prepared to seek a rescue from the central government and European finance ministers approved the bailout of Spanish banks.
Sweden’s Riksbank kept its key interest rate at 1.5 percent on July 4, after lowering the benchmark twice since December. The central bank raised its economic growth for Sweden this year to 0.6 percent from 0.4 percent, at the same meeting.
The krona has appreciated 1.1 percent in the past week, the second best performer after the Australian dollar of the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes. The euro slumped 1.1 percent, and the dollar fell 0.3 percent.
All of the 31 analysts surveyed by Bloomberg News predict the krona will weaken against the euro by year-end. The estimates range from 8.50 per euro to 9.30, with a median forecast at 8.80.
“It’s been the standout flow,” said Chris Walker, a currency strategist at UBS AG in London. “We’re a bit cautious because positioning is very high. Even though the market has moved a long way, it’s probably consolidating around these levels now.”
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