Riksbank Tempts Krona Bulls as Comments Suggest Policy Shift

(Bloomberg) -- The outlook for Sweden’s krona seems to be improving after recent comments by central bankers provided ammunition to currency bulls.

UniCredit SpA recommended buying the krona against a basket of the euro and dollar after Riksbank Governor Stefan Ingves said Wednesday that the central bank is now on target with inflation. His comments are likely to act as a catalyst for further krona strengthening, strategists Kathrin Goretzki and Roberto Mialich wrote in a note.

Riksbank Tempts Krona Bulls as Comments Suggest Policy Shift

The krona’s recent rally, which has seen it touch its strongest level against the euro since November, began on Jan. 24, when Riksbank Deputy Governor Cecilia Skingsley said in an interview with Bloomberg TV in Davos that given that inflation is at target it makes sense to start tightening policy a bit earlier than the European Central Bank.

Following on from Skingsley’s comments last week was First Deputy Governor Kerstin af Jochnick, who said on Jan. 29 that development in inflation has been “in line” with the central bank’s forecasts and that wage increases are moving in the right direction.

Any of the comments may not have not have meant much in isolation, but such a steady stream of confident assertions by policy makers suggests that the central bank may finally be on its way to tighten after keeping the key rate at a record low of minus 0.5 percent for almost two years, accompanied by a quantitative-easing program.

And as concerns over Swedish housing prices ease, others too think it may be a good idea to revisit long positions in Nordic currencies. Strategists at Bank of America Merrill Lynch last week suggested going long on both the Swedish krona and the Norwegian krone via options as the era of unconventional monetary policy is being confined to history.

©2018 Bloomberg L.P.