The Norwegian and Swedish currencies added to last week’s slump triggered by Norway’s central bank unexpectedly lowering its outlook for interest rate.
The krone slid 0.8 percent to 8.0165 per euro, while the Swedish krona weakened 1.1 percent to 8.8523 per euro, the lowest level since June 20, 2012, as of 3:11 p.m. local time. The currencies have declined for three straight days.
“Norges Bank surprised almost everyone last week with the downward revision of the interest rate path,” said Magne Oestnor, an analyst at DNB ASA in Oslo, in an e-mailed note today. “Who would have thought we would see kroner at 8.00 per euro anytime soon at the beginning of last week? I certainly didn’t.”
Norway’s currency last week weakened beyond 8 per euro for the first time since December 2010 after the central bank on June 20 signaled a 50 percent chance of a September rate cut, also dragging down the Swedish krona. The currencies were buffeted by a strengthening dollar after Federal Reserve Chairman Ben S. Bernanke on June 19 said policy makers may begin paring asset purchases this year.
Foreigners sold “massive amounts” of kroner on June 20, said DNB’s Oestnor. “According to our data, they haven’t sold as much krone in one day since October 2008.”
Danske Bank A/S said in a note today that the Swedish krona slid even amid “supporting news” suggesting unchanged rates and a state asset sale in Nordea Bank AB shares. The sell-off was driven by speculation the Riksbank will also need to move toward lower rates, Danske said.
“We doubt that this will happen and see value in krona at this level but again, global sentiment is the joker,” Danske said. “Note that liquidity is thin in the Scandies and erratic moves are likely the next couple of days.”
Norway’s krone has weakened 5 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. Sweden’s krona rose 1.4 percent.
“Norwegian fundamentals still are favorable to the krone,” said Oestnor. “But no one seems to care.”
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