Swedish crown jumps on December rate rise plan, NOK feels spillover, ECB awaited

Credit: REUTERS/Norsk Telegrambyra AS

By Sujata Rao and Elizabeth Howcroft

Oct 24 (Reuters) - The Swedish crown rose 0.7% on Thursday as the country's central bank stuck to its plans to raise interest rates in December and the Norwegian crown was pulled higher as well, despite a relatively dovish message from the Norges Bank.

A trio of central bank meetings were being held on Thursday, and while none was expected to make any changes in interest rates, investors were looking for forward guidance from Sweden and Norway. A European Central Bank meeting will be Mario Draghi's last as president.

The Swedish crown rose to its strongest against the dollar since mid-August and gained 0.6% against the euro after the Riksbank stuck to its plan for raising rates in December, though it said the rate path after that was not yet clear. SEK=D3, EURSEK=D3 It kept rates steady at -0.25%.

The Norwegian crown slipped 0.1% against the euro as the Norges Bank said rates were likely to be held at the current 1.5% rate. EURNOK=D3. The decline was contained by the Swedish crown's rise, because the two currencies often track each other. The Norwegian currency gained 0.1% versus the dollar NOK=D3.

"We don’t think that the SEK gains will last for long, because this interest rate increase may be interpreted by the market as a policy rate mistake," said Petr Krpata, chief EMEA FX strategist and IR strategist at ING, suggesting the bank may be "hiking into a downturn".

Krpata noted that the Norwegian crown strengthened in line with the Swedish crown, around 8.30 London time, meaning that its strength is "spillover from the Riksbank decision".

The Norwegian crown recently reached a record low to the euro and an 18-year low to the dollar despite rate hikes this year EURNOK=D3, NOK=D3.

Meanwhile the euro rose 0.2% to a session high of $1.1163 EUR=EBS after data showed French business activity rose more than expected in October. It gave up those gains after German figures came in weaker than expected .

Investors now await the ECB meeting. No policy changes are expected, but investors will be checking to see whether Draghi talks about recent reports of rifts within the bank over stimulus.

"Today is going to be all about the ECB," said Rabobank FX strategist Piotr Matys. "We don't expect the ECB to change the parameters of its monetary policy," but Draghi may use his last meeting to encourage governments to use fiscal measures to propel growth.

Most Asian currencies edged up in the absence of developments in the Sino-U.S. trade war.

The Australian dollar was down 0.2%AUD=D3 versus the U.S. dollar and the New Zealand dollar fell as much as -0.3% to 0.6403 NZD=D3.

The pound was little changed at just under recent highs of $1.30, having chalked up 6% gains since Irish and British leaders said they could "see a possible pathway to a deal" on Oct. 10. GBP=D3.

(Reporting by Elizabeth Howcroft, editing by Larry King)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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