Sweden’s Prime Minister Fredrik Reinfeldt said a krona slump that’s spooked traders has brought relief to exporters in the largest Nordic economy after the government ruled out tampering with the exchange rate.
The Swedish krona and Norway’s krone suffered a sell-off last week that continued through Monday amid signals from the U.S. Federal Reserve it will scale back stimulus. Sweden’s krona fell 1.9 percent against the euro in the week through June 21, and this week reached its lowest per euro since June 18, 2012. Against the dollar, the krona sank as much as 2 percent on Monday to its lowest since November.
“For many parts of our export industry this is a relief because the currency has gone very strong,” Reinfeldt said yesterday in an interview outside Oslo. “We must see over time if this is something that has come to stay, it’s too early to say.”
The sell-off marks a reversal of the krona’s popularity earlier this year, when Sweden’s AAA rating attracted investors eager to escape the debt crisis in southern Europe. A 31 percent krona appreciation from the end of 2008 through the middle of March this year prompted Finance Minister Anders Borg to warn the currency’s strength may warrant some concern. Central bank Governor Stefan Ingves also said earlier this year the krona’s strength was in part to blame for below-target inflation.
“We should just reflect that the krona is at market price, we do not try to intervene,” Reinfeldt said. “We used to have an economy, export-oriented, that depreciated our currency. In the latest years we have a strong currency and a structural change in our industry, so for some part of our export industry the strong krona has an impact, if it goes down a little bit it’s easing their economic links, especially towards Europe.”
Borg said yesterday he welcomed the krona’s decline amid “problems in the world economy,” in an interview with Bloomberg Television.
The krona gained 0.1 percent to 8.7724 per euro as of 12:14 p.m. in Stockholm. It slipped 0.2 percent against the dollar to 6.7292.
“From a Swedish perspective we note that nothing from the fundamental side has changed since last week,” Tina Mortensen, an economist at Citigroup Inc. in London, said in a note to clients.
Almost 70 percent of exporters in the largest Nordic economy said the krona’s strength at the end of May was hurting their business, according to a survey published Monday by the state-owned export lender, SEK. Half of Sweden’s economy comes from exports, of which about 70 percent are destined for Europe.
Trade Minister Ewa Bjoerling has repeatedly urged Sweden’s exporters to reduce their reliance on Europe, arguing it would make the country less vulnerable to economic shocks. She says she wants manufacturers to target buyers in China, India and Brazil.
The krona’s strength through May contributed to keeping inflation well below the central bank’s 2 percent target. Headline consumer prices fell 0.2 percent in May, after dropping 0.5 percent in April, according to Statistics Sweden. Unemployment eased to 7.9 percent in May from 8.3 percent in April, higher than in neighboring Norway and Denmark, according to the office.
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