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FOREX-Swedish crown jumps on December rate rise plan, NOK feels spillover, ECB awaited

Published 24/10/2019, 09:53
© Reuters.  FOREX-Swedish crown jumps on December rate rise plan, NOK feels spillover, ECB awaited

* Dollar steady with no trade war developments

* Brexit limbo keeps pound near recent highs

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Sujata Rao and Elizabeth Howcroft

Oct 24 (Reuters) - The Swedish crown rose 0.7% on Thursday

as the country's central bank stuck to its plans to raise

interest rates in December and the Norwegian crown was pulled

higher as well, despite a relatively dovish message from the

Norges Bank.

A trio of central bank meetings were being held on Thursday,

and while none was expected to make any changes in interest

rates, investors were looking for forward guidance from Sweden

and Norway. A European Central Bank meeting will be Mario

Draghi's last as president.

The Swedish crown rose to its strongest against the dollar

since mid-August and gained 0.6% against the euro after the

Riksbank stuck to its plan for raising rates in December, though

it said the rate path after that was not yet clear. SEK=D3

EURSEK=D3 It kept rates steady at -0.25%.

The Norwegian crown slipped 0.1% against the euro as the

Norges Bank said rates were likely to be held at the current

1.5% rate. EURNOK=D3 . The decline was contained by the Swedish

crown's rise, because the two currencies often track each other.

The Norwegian currency gained 0.1% versus the dollar NOK=D3 .

"We don't think that the SEK gains will last for long,

because this interest rate increase may be interpreted by the

market as a policy rate mistake," said Petr Krpata, chief EMEA

FX strategist and IR strategist at ING, suggesting the bank may

be "hiking into a downturn".

Krpata noted that the Norwegian crown strengthened in line

with the Swedish crown, around 8.30 London time, meaning that

its strength is "spillover from the Riksbank decision".

The Norwegian crown recently reached a record low to the

euro and an 18-year low to the dollar despite rate hikes this

year EURNOK=D3 NOK=D3 .

Meanwhile the euro rose 0.2% to a session high of $1.1163

EUR=EBS after data showed French business activity rose more

than expected in October. It gave up those gains after German

figures came in weaker than expected

Investors now await the ECB meeting. No policy changes are

expected, but investors will be checking to see whether Draghi

talks about recent reports of rifts within the bank over

stimulus.

"Today is going to be all about the ECB," said Rabobank FX

strategist Piotr Matys. "We don't expect the ECB to change the

parameters of its monetary policy," but Draghi may use his last

meeting to encourage governments to use fiscal measures to

propel growth.

Most Asian currencies edged up in the absence of

developments in the Sino-U.S. trade war. The Australian dollar was down 0.2% AUD=D3 versus the U.S.

dollar and the New Zealand dollar fell as much as -0.3% to

0.6403 NZD=D3 .

The pound was little changed at just under recent highs of

$1.30, having chalked up 6% gains since Irish and British

leaders said they could "see a possible pathway to a deal" on

Oct. 10. GBP=D3 .

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