Swedish Krona Rallies after Central Bank Slashes Interest Rate More than Expected

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Swedish Krona Rallies after Central Bank Slashes Interest Rate More than ExpectedThe Swedish krona rallied to its strongest point since September 2011 after the central bank reduced interest more than investors had expected.

The krona fell 1.8 percent to trade at 9.3232 per euro in midmorning trading in London. Yield on the 10-year bonds plunged 4 basis points to 1.84 percent after the Riksbank slashed the key rate by 50 basis points to 0.25 percent. Economists in a Bloomberg survey had expected the rate to decline 25 basis points.

“Riksbank rate was massively more dovish than what most people in the market expected,” Carl Hammer, a Stockholm-based chief foreign-exchange strategist at SEB AB told Bloomberg. “It wants to engineer a weaker currency. If you deviate a lot from global monetary policy and try to run your own independent monetary policy, you run the risk of a stronger currency.”

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Gold fell 0.5 percent while silver plunged 0.6 percent as the market awaited U.S. monthly payrolls data and euro zone monetary policy decision. The payrolls report follows Wednesday’s data by the ADP Research Institute that indicated that U.S. employment surged the strongest since 2012 in June as more workers were absorbed than estimated. Analysts expect the European Central Bank to retain the current interest rates.

Gold prices fell to $1,321.27 per ounce while silver plunged to $21.0356 per ounce. Analysts expect that the Washington-based Labor Department will announce that employers absorbed 215,000 employees in June, while unemployment rate will remain close to six-year low of 6.3 percent. Another report by the Institute for Supply Management is expected to indicate that services sector, which contributes 90 percent of U.S. economy, rose in June.

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To contact the reporter of this story; Jonathan Millet at john@forexminute.com