The Swedish crown soared against the U.S. dollar and euro on Tuesday. The currency rose by 1.2% versus the greenback to 9.911, reaching a two-week high. And it climbed up by 0.6% against the euro to 10.7905, its highest point since mid-March.
The central bank held interest rates steady. This, combined with stimulus measures issued to support an economy during the pandemic crisis, boosted the crown.
Sweden is currently facing its worst downturn since World War Two. Traders had watched closely for any sign the Riksbank would push rates back below zero. However, the Riksbank left its benchmark rate at 0%, while the Governor announced that a rate cut would not solve Sweden’s economic problems.
According to the Swedish central bank, it’s better to focus on credit supply and counteract a rise in interest rates to companies and households. Morten Lund, the FX strategist at Nordea, noted that it’s hard not to see this as a bit hawkish. If they didn’t cut rates now, when would they cut them? He expects rates to remain steady for the following two years.
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What about the other currencies?
Investors are watching for the policy meeting’s outcome. The U.S. Federal Reserve and European Central Bank will announce final decisions later this week. Meanwhile, the demand for riskier currencies increased; however, the moves are still subdued so far.
The U.S. dollar lowered against a basket of currencies, dropping by 0.5% to 99.970, its lowest point in a week. It declined against the Japanese currency as well, trading at 106.705 yen.
On the other hand, the euro rose by 0.5% to $1.08805 as oil steadied after its latest plunge. The European Central Bank scheduled a meeting on Thursday, along with the Fed.
The ECB announced an enormous bond-buying program recently. Still, the European leaders argue about the eurozone rescue package, and some investors expect more profound action.
All this uncertainty influenced the euro negatively. Furthermore, expectations for economic recovery from the coronavirus pandemic has pressured the greenback and caused the rally of riskier currencies.
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