Krona down on maintaining interest rate and Euro up ahead of ECB assembly

09-03-2009 16:22

The Swedish Krona fell this Thursday against the European common currency and the majority of the 16 most popular currencies as a result of the Swedish central bank maintaining its interest rate level at the lowest level in the history of 0.25%, resulting in suggestions that the condition of the Swedish financial remains complex. The Single Currency started this week rather gloomy, while it rose today due to better forecasts for the Eurozone economy, demonstrating an economic expansion that exceeds earlier outlooks, boosting the demand for the European common currency.

Krona down

The Krona dropped against various currencies as Riksbanken, the Swedish central bank, confirmed that it will make more than $10 billion available for Swedish banks in order to prevent the present banking slump in Sweden. Riksbanken also maintained the present interest rate level of 0.25%, which should provide support to credit and consumption in order to avoid an economic slump. The Krona was also affected by the Swedish central bank suggesting that the interest rates at the record low level will be continued in 2010, decreasing demand for the Krona.

Maintaining interest rate

The condition of the Swedish economy remains very indecisive, even if it will indicate that it has overcome the most intensive periods of the recession. The forecasted continuation of the interest rates added to the exceptionally passive tone of the announcement by the central bank, decreasing the attractiveness of Swedish investments and declining the demand for the nation´s currency, which could have a positive impact on the competitiveness of Swedish products.

ECB assembly

It is expected that the European Central Bank (ECB) will remain the present base interest rates. However, optimistic traders believe that the ECB will increase the forecasts regarding the economic expansion in the Eurozone, while the Eurozone economy recovers gradually, demonstrated by last month´s report. The Single Currency was also boosted by positivism in stock and commodities markets this Thursday, after falling against the Japanese Yen during the last 7 trading sessions on the back of investors preferring higher-yielding trading options instead of the Yen´s safety, as a result of suggestions that a number of economies will recover earlier than expected, such as the German economy.

Euro up

Currency specialists believe that today´s ECB assembly will boost the Single Currency to rise. Earlier reports released in July, mostly concerning the French and German economies, will probably be considered as indications of an economic improvement in the Eurozone, increasing the attractiveness of investments priced in Euros. It is expected that interest rates will be increased on the mid-term, if the Eurozone economy continues to perform well.