Swedish Krona Near 5-Year Low on Rate Cut

Swedish kronaThe Swedish krona advanced it’s yearly low levels against the U.S. dollar today as the country’s central bank surprised the market participants with the biggest rate cut in the last 16 years to prevent the economy from contracting.

The official repo rate was reduced from 3.75 percent to 2 percent by 175 basis points today. It exceeded the traders’ expectations that were aimed on 1 percent cut. The Riksbank announced its decision today — 3 months after it has raised the interest rate to 4.75 percent.

The krona will definitely become a victim of such unexpectedly huge rate cut. Analytics believe that the Sweden’s government will have a hard time balancing between the target inflation rate and stimulating the economy growth to keep the unemployment as low as possible. The krona will have to continue its decline both against the dollar and the euro.

USD/SEK rate went up from 8.1871 to 8.3470 as of 9:53 GMT today after falling for two consecutive days before. The local maximum was set at 8.5234 on November 21 and if the currency pair goes above that level, it will set a new record high rate since August 2003.