Sweden’s krona slumped to its worst position in eight months after weaker-than-forecast inflation data stoked concern about the central bank’s ability to raise borrowing costs.
The latest numbers add to investor scepticism on the outlook for the krona, which is ironically forecast to return the most among the Group-of-10 exchange rates this year. The currency had its worst January since 1993 after retail sales and consumer confidence slumped in Scandinavia’s biggest economy.
The currency snapped two days of gains on Tuesday after consumer prices fell 1 percent in January from a month earlier, missing even the lowest estimate in a Bloomberg survey that forecast a decline of 0.7 percent.
“The last couple of months has showed that investors are somewhat reluctant to buy SEK, and this figure doesn’t change the negative sentiment,” said Kiran Sakaria, a strategist at Handelsbanken AB in Stockholm. “We expect inflation will pick up somewhat during the first half of 2019, and if we’re right that will lead to the markets pricing a higher probability of a rate hike this autumn and we will probably see a gradual strengthening of the krona.”
The krona weakened as much as 1.1 percent, the most since June, to trade at 10.5947 per euro. It has slumped about 4 percent this year. The krona and the Swiss franc are the only major exchange rates to have declined against the common currency so far in 2019.