Risk aversion and waning confidence that the US Federal Reserve will raise interest rates in September caused Monday’s sharp fall in market interest rates and the US dollar to weaken against other currencies, including the Swedish krona.
The fact that the Swedish currency strengthens when there is turbulence on the financial markets is not something that is appreciated by the Riksbank, which is actively seeking to keep the krona weak to boost inflation.
“It’s a nightmare scenario for the Riksbank that the krona may become a safe haven at times like this,” says Claes Måhlén, chief strategist at Handelsbanken.
Traditionally, the Swedish krona has never been a safe haven, but following the financial crisis of 2008 (ed.) Sweden was viewed as being a refuge where assets could be placed in turbulent times.