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Forex - Swedish Krona Stars as Riksbank Eyes December Rate Hike

ForexOct 24, 2019 04:05AM ET
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© Reuters. -- The Swedish krona topped the bill in European foreign exchange trading early Thursday after Sweden’s Riksbank indicated it’s still on track to raise its key interest rate back to 0% from -0.25% in December, breaking with the downward global trend in rates this year 2019 and ending its experiment with negative interest rates.

By 4 AM (0800 GMT), the krona was up half a percent against the euro and dollar, having earlier hit one-month and two-month highs against them, respectively.

The Riksbank said that uncertainties remain high and it revised down its forecast for the repo rate next year to reflect that. All the same, the move will embolden those who think that the European Central Bank should abandon its monetary policy easing, the negative side effects of which are acknowledged even by its architect, ECB President Mario Draghi.

Draghi is due to preside over his last press conference at 08:30 AM ET (1230 GMT) before handing over to Christine Lagarde, the current managing director of the International Monetary Fund. Draghi was sharply criticised by current and former colleagues at the ECB since last month’s press conference, not least for effectively tying the hands of his successor by resuming outright bond purchases (quantitative easing), even though he softened the bank’s forward guidance by removing explicit references to the date of any future rate hike.

The press conference comes against the backdrop of continued weakness in the euro zone and global economy. Flash purchasing manager indexes announced by IHS Markit Thursday showed the biggest drop in Japanese manufacturing activity in three years, while the euro zone’s PMI fell to 45.7 from 46.1, its lowest in seven years.

The euro and the British pound were largely in a holding pattern against the dollar as the market waits to see what kind of extension of the Brexit deadline the EU will offer. The U.K. has requested a three-month extension to Jan. 31, a timeline that would allow for a general election and the formation of a new government. There is, however, speculation that the EU will only offer enough time for the current parliament to pass legislation on the Withdrawal Agreement that was approved by member states last week.

By 4 AM ET, the dollar index, which measures the greenback against a basket of developed-market currencies, was flat at 97.227.

Among emerging market currencies, both the Turkish lira and the Russian ruble held the gains they made after President Donald Trump lifted U.S. sanctions on Turkey, effectively blessing the Russian power-broking behind a ceasefire in northern Syria.

Forex - Swedish Krona Stars as Riksbank Eyes December Rate Hike

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