The Swedish krona’s best quarter in about a decade shows it rose so fast that it may even raise concern among policy makers. At its Wednesday meeting, the Riksbank might signal that it’s concerned about the krona surge, as it could threaten exports accounting for about half of the economic output.
That could trigger a pullback in the exchange rate, according to Toronto-Dominion Bank and Nordea Bank Abp. The median forecast in a Bloomberg survey is for the currency to slip by about 0.7% this quarter.
The krona has jumped about 9% from a low of 11.4262 per euro reached at the peak of the pandemic-fueled market turmoil. While the rebound drew on a broader view that the growth shock from the coronavirus could be short-lived, it also reflected Sweden’s moves to keep its economy open and interest rates stable in the crisis -- which set it apart from peers and supported its currency.
The Riksbank, which half a year ago became the world’s only central bank to exit a policy of sub-zero borrowing costs, is unlikely to revisit negative rates in Wednesday’s announcement. It may, however, look at extending its quantitative-easing program -- a move that could damp the krona’s strength.