Nordic Currencies: Norway's Krone Gains Before Jobless Report

By Bo Nielsen

Aug. 25 (Bloomberg) -- Norway's krone rose against the euro before a report this week that will probably show the June unemployment rate held near the lowest level in two decades.

The jobless rate stayed at 2.5 percent, according to the median estimate of 15 economists in a Bloomberg News survey. The data will be released by Statistics Norway on Aug. 27. The mainland economy, which excludes oil activities, grew 1 percent after shrinking 0.1 percent in the first quarter, a government report last week showed.

``A steady number suggests that the previously existing inflation pressure is going to be maintained,'' said Geoffrey Yu, a currency strategist in London at UBS AG, the second-biggest foreign-exchange trading bank. ``Norges Bank is almost certainly going to hike rates next month.''

The Norwegian krone was at 7.9326 per euro by 1:08 p.m. in Oslo, from 7.9411 on Aug. 22. and little changed at 5.3724 per dollar. The Swedish krona slipped to 6.3354 per dollar, after falling to 6.3639 earlier, from 6.3246.

Sweden's krona pared declines against the dollar after a government report showed the country's trade surplus widened in July as demand for its exports increased.

The unadjusted trade balance reached 9.4 billion kronor ($1.48 billion), from a revised 9 billion kronor in June, Statistics Sweden said on its Web site today. Danske Bank, Scandinavia's second-biggest bank, forecast the surplus would narrow to 6 billion kronor.

The country's main trading partner is the European Union, whose economy contracted in the second quarter for the first time since the launch of the euro almost a decade ago.

Fiscal Changes

Finance Minister Anders Borg said last week the Swedish government will slash taxes and raise spending by a total of 30 billion kronor next year to counter slowing economic growth and rising unemployment.

Norges Bank, which next sets rates on Sept. 24, raised its key rate to 5.75 percent in June and indicated it may lift it to 6 percent to prevent inflation from accelerating. Consumer-price growth reached a 7 1/2-year high of 2.9 percent in July.

Iceland's krona snapped a two-day gain, falling 0.3 percent to 81.68 per dollar.

Nordic government bonds declined, with the yield on Sweden's 5.25 percent note due March 2011 falling 3 basis points, or 0.03 percentage point, to 4.37 percent. The yield on Norway's 6 percent government note maturing May 2011 fell 2 basis points to 5.05 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net