Swedish cuts unbalance weak euro

Swedish cuts unbalance weak euro

Story link: Swedish cuts unbalance weak euro

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The Swedish krona lost 0.1 percent against the Norwegian krone on Tuesday to SKr1.1756 in reaction to a cut in Sweden’s interest rates to 1.5 percent by Riksbank, as well as due to the bank’s reduction of its economic growth forecast for Sweden for 2005.

An earlier forecast called for growth of 3.2 percent but the new forecast sees Sweden’s economy growing only 1.9 percent this year.

The euro also reacted to the news from Sweden and to the increased talk the rate cut triggered that the European Central Bank might follow suit and cut eurozone interest rates soon.

Despite the insistence of ECB officials that there is no consideration being made to change interest rates in either direction and that the current rate of 2 percent is “appropriate”, the euro fell in relation to the US dollar, sterling and the yen.

The shared currency fell 0.1 percent to $1.2137 in relation to the dollar, lost 0.2 percent to sterling, to £0.6640, and declined 0.9 percent to ¥131.70 against the yen.

The Canadian dollar rose 0.4 percent to C$1.2297 against the US dollar on the news that Canadian retail sales was up 1.5 percent in April compared to the same month last year. This was better than the 0.6 percent gain that had been expected.

The yen was strong, gaining 0.8 percent in relation to the US dollar, to ¥108.43 and rising to ¥198.14, up 0.7 in relation to sterling.