Nordic Currencies: Sweden's Krona Falls After German Ifo Drops

By Bo Nielsen

Aug. 26 (Bloomberg) -- Sweden's krona fell to the lowest since February against the dollar after a report showed business confidence in Germany, its biggest export market, dropped to a three-year low.

The krona declined after Ifo institute's German business confidence index declined to 94.8 in August, the lowest level since August 2005, from 97.5 the previous month and below the 97.2 estimate in a Bloomberg survey. A Swedish government report showed producer prices rose an annual 3.3 percent in July, up from 3 percent in the prior period.

``The slowdown in Europe will feed through fairly quickly to the Swedish economy,'' said Ian Stannard, a senior currency strategist in London at BNP Paribas SA, France's biggest bank. ``That leaves the krona vulnerable.''

The Swedish krona slipped to 6.4175 per dollar at 11:18 a.m. in Stockholm, the lowest since February, from 6.3501 yesterday. It traded at 9.3685 per euro from 9.3694. The Norwegian krone was at 7.9140 per euro from 7.9239. It fell 0.9 percent to 5.4185 per dollar.

Another government report showed the economy of Sweden's main trading partner contracted in the second quarter for the first time in almost four years as companies cut investments and consumers cut back spending.

Norway's krone was little changed versus the euro before a report tomorrow that will probably show the June unemployment rate held near the lowest level in two decades, according to a Bloomberg survey.

Iceland's krona slipped for a second day against the dollar, dropping to 83.45, the weakest level since June 23, from 82.53.

Nordic government bonds declined, with the yield on Sweden's 5.25 percent note due March 2011 falling 7 basis points, or 0.07 percentage point, to 4.28 percent. The yield on Norway's 6 percent government note maturing May 2011 slipped 3 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