Fri, 08 Dec 2023

STOCKHOLM, Sweden: Days before the Riksbank, Sweden's central bank, is expected to again raise interest rates, the Swedish krona hit a record low against the euro this week.

From September 15, the euro hit 11.995 versus the Swedish currency, up around 0.6 percent.

This year, the krona has suffered heavily against the euro, losing some 7.5 percent of its value.

Against the U.S. dollar, the krona has also weakened to as much as 11.251 per dollar, its lowest level since last October.

The Riksbank is due to set interest rates this week and is expected to raise them by 25 basis points to 4 percent.

Last week, the European Central Bank raised interest rates in the eurozone to 4 percent, a record high.

Kenneth Broux, senior strategist at lender Societe Generale, said, "The trend continues of weak European FX. The Riksbank has said in the past that if the currency keeps weakening, then a higher rate peak is possible. But this is self-defeating right now, piling more pressure on the economy."

With inflation and interest rates running at similar levels in Sweden and the eurozone, many analysts have debated the cause of the krona's decline.

However, some argue that Sweden's weaker economy is the key factor.

In August, Sweden's Finance Ministry said the country's economy is forecast to contract 0.8 percent in 2023, while the European Central Bank predicts the eurozone will grow by 0.7 percent.

The Riksbank, which has raised interest rates from 0 percent in early 2022 to the current 3.75 percent, said Swedish real estate prices will likely fall between 15 percent and 20 percent by the autumn from the February 2022 peak.

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