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

By Bo Nielsen

Aug. 26 (Bloomberg) -- Sweden's krona fell to the lowest level 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 weakened for a third day after the Ifo institute's German investor sentiment index slipped to 94.8 in August, the lowest level since August 2005, compared with 97.5 the previous month and 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 6.4290 per dollar by 1 p.m. in Stockholm, the lowest level since February, from 6.3501 yesterday. It was little changed at 9.3730 per euro.

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

In other trading, Norway's krone rose versus the euro before a report tomorrow forecast by economists to show the June unemployment rate held near the lowest level in two decades.

The Norwegian krone climbed to 7.9023 per euro, from 7.9239. It fell 1 percent to 5.4218 per dollar as the price of crude oil, the country's biggest source of exports, slipped to as low as $112.36 a barrel, from $115.11 yesterday.

Iceland's krona dropped for a second day versus the dollar, dropping to 83.44, the weakest level since June 23, from 82.53.

Nordic government bonds gained, 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 1 basis point to 5.01 percent. Yields move inversely to bond prices.

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