Nordic Currencies: Swedish Krona Falls to Record as Stocks Drop

By Bo Nielsen

Nov. 18 (Bloomberg) -- Sweden's krona dropped to a record against the euro as global stock losses sapped demand for higher-yielding currencies.

The krona also declined against the dollar on concern the Scandinavian economy will slow as its biggest trading partner, the euro zone, slides further into a recession. Norway's krone fell against the euro as the price of crude oil, the country's biggest export, traded at the lowest level in almost 22 months.

``While Sweden will suffer from the slowdown, the domestic economy is stronger and the balance of payments more solid than other European currencies, so at these levels the krona looks like a good buy,'' wrote Adrian Schmidt, a London-based senior currency strategist at Royal Bank of Scotland Plc, in a research note today.

The krona fell as low as 10.2062, the weakest level since the euro's debut in January 1999, and was at 10.1641 at 1:22 p.m. in Stockholm, from 10.1411 yesterday. It slipped for a third day versus the dollar, declining to 8.0493 from 8.0167.

The benchmark Stockholm OMX 30 slid 3 percent, extending its loss this year to 43 percent, as investors sold assets in Scandinavia's biggest economy. Futures on the Standard & Poor's 500 Index fell 2.5 percent.

The euro region entered its first recession in 15 years in the third quarter, the European Union's statistics office said Nov. 14. Sweden's economy will grow 1.7 percent this year and 1.4 percent next year, according to a Bloomberg survey.

Nordic Target Rates

The Swedish Riksbank will cut its key repurchase rate to 2 percent from 3.75 percent by mid-2009, while Norges Bank will reduce the overnight deposit rate to 3.75 percent from 4.75 percent, according to UBS AG. Both central banks meet Dec. 17 to decide on interest rates.

Norway's krone fell 0.2 percent to 8.8647 per euro and 0.6 percent to 7.0317 against the dollar.

Crude oil for December delivery dropped as much as 82 cents, or 1.5 percent, to $54.13 a barrel on the New York Mercantile Exchange. That's the lowest since Jan. 30, 2007.

Iceland's krona will return to free float by year-end after the island clinched an International Monetary Fund-led loan of $5 billion, Prime Minister Geir Haarde said.

``I think that is certain'' that the currency will float this year, Haarde told reporters at a press conference in Reykjavik yesterday. The IMF-led loan will be approved by the fund's executive board tomorrow, Haarde said.

The krona traded at 220 per euro yesterday among foreign banks, according to TD Securities Ltd. in London. It was bought at 171.5 against the euro at yesterday's auction by the central bank, according to Sedlabanki.

Danish Bond Sale

The Danish National Bank sold 10.4 billion kroner ($1.8 billion) worth of 30-year governments bonds with an average yield of 4.592 percent today, according to Ove Sten Jensen, a department head at the Nationalbanken, which handled the sale. The bank received bids of $9.35 billion.

The auction followed the introduction of the bond Nov. 11, when the bank sold $5 billion of the security with a yield of 4.62 percent. The bank plans to sell $10.2 billion of the securities in total, Steen said.

Government bonds in the region fell. The yield on Norway's 6 percent government bond maturing in May 2011 gained 12 basis points to 3.62 percent. The yield on Sweden's 5.25 percent note due in March 2011 rose one basis point to 2.36 percent. Yields move inversely to bond prices.

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