Nordic Currencies: Krona Snaps 11-Day Decline Against Dollar

By Bo Nielsen

Sept. 12 (Bloomberg) -- Sweden's krona climbed against the dollar, ending the longest losing run in 33 years, as gains in stocks spurred demand for higher-yielding currencies. Norway's krone rose for the first time in six days versus the euro.

The Swedish currency also advanced versus the euro as optimism Lehman Brothers Holdings Inc. will find a buyer pushed equities higher in Asia and Europe. A technical indicator showed the krona's 2.6 percent drop against the dollar in the past 11 days was excessive.

``The krona is a risk trade and when the attitude toward risk improves, people tend to buy it,'' said Anders Eklof, a currency strategist in Stockholm at Nordea AB, the region's biggest bank. ``In the longer run the krona looks vulnerable after the Riksbank confirmed the economy is moving down faster than expected.''

The krona rose 0.8 percent to 6.7546 per dollar by 1:31 p.m. in Stockholm, from 6.8063 yesterday and 6.6353 on Sept. 5. Its 11-day slump was the longest since July 24, 1975. The currency was also at 9.5152 per euro, from 9.5280 and 9.4653 a week ago.

Europe's Dow Jones Stoxx 600 Index climbed 0.8 percent, while the MSCI Asia Pacific Index gained 0.9 percent as speculation Lehman will be rescued in a takeover eased concern about bank failures.

Trading envelopes, which measure how far from the mean a price has strayed, show the krona's slide versus the dollar was more than double the typical changes in the past 20 days. The krona's 14-day relative strength index against the dollar fell to 18.72, below the level of 30 that signals a change in price direction.

The krona slipped 0.9 percent versus the dollar and 0.7 percent against the euro and in the past five days.

Yield Premium

The Riksbank last week lifted its main interest rate a quarter-percentage point to 4.75 percent and said growth and inflation will slow in Scandinavia's largest economy. The rate is only topped by New Zealand, Australia and Norway among the Group of 10 nations.

The Norwegian krone rose 0.8 percent to 5.7652 per dollar, also snapping an 11-day decline, for a weekly loss of 2.8 percent. It climbed to 8.1189 per euro, from 8.1320 yesterday, the first gain since Sept. 4.

Barclays Capital yesterday revised down its forecast for the krone versus the euro as the price of oil, Norway's biggest export, headed for a weekly decline.

The krone will trade at 8.15 per euro in one month, from a previous estimate of 7.95 per euro, Adarsh Sinha, a London-based analyst at Barclays, wrote in a note to clients. He also changed his six-month forecast to 7.90 krone per euro from 7.75 per euro and his one-year prediction to 7.75 per euro from 7.65 per euro.

Oil Prices

The price of oil rose today from a five-month low as Hurricane Ike headed toward a near-direct hit on Houston, the busiest U.S. refining center. Crude has fallen about 30 percent from the July 11 record of $147.27 a barrel.

In other trading, Iceland's krona gained 0.3 percent to 90.86 per dollar after the central bank, or Sedlabanki, yesterday kept its benchmark interest rate at a record 15.5 percent, in line with a Bloomberg survey. The krona headed for a loss of 3.2 percent, its third weekly decline.

Nordic government bonds were mixed, with the yield on Sweden's 5.25 percent note due March 2011 little changed at 4.15 percent, from 4.18 on Sept. 5. The yield on Norway's 6 percent bond maturing May 2011 rose 2 basis points to 5.04 percent, according to Danske Bank prices. Yields move inversely to bond prices.

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