USD/SEK: Swedish krona sinks after dovish Riksbank rate decision
- The USD/SEK turned higher today after the relatively dovish interest rate decision by Riksbank.
- The bank left interest rate at zero per cent and pledged to keep it lower for longer.
- The pair is also rising because of a stronger US dollar.
The USD/SEK pair is up slightly as traders react to the Riksbank interest rate decision and the overall stronger US dollar. The pair is trading at 8.8830, which is significantly higher than the August low of 8.3520.
Riksbank interest rate decision
The Swedish central bank concluded its monetary policy meeting today. As most analysts polled by Reuters and Bloomberg were expecting, the bank left interest rate unchanged at 0.00%. In the statement, the bank said that the rates will remain at these levels for the next few years. Further, the bank said that it would continue with its asset purchases policies to help the country recover. The statement said:
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“To provide support to economic developments and help inflation to rise towards the target, the Riksbank is continuing its asset purchases and offering liquidity in all the programmes launched so far this year.”
The decision comes at a time when the country has reported mixed economic numbers. Early this month, data showed that the manufacturing and services PMIs increased to 53.4 and 56.6, respectively. Another data from the statistics office showed that the country’s industrial production increased by 2.4% in July after rising by 8.2% in the previous month. Industrial orders fell by 6.4%.
Meanwhile, inflation has remained low. The latest data shows that the headline consumer inflation fell by 0.1% in August. It rose by an annualised rate of 0.8%. The CPI at constant interest rate fell by 0.1%. At the same time, the unemployment rate dropped from 8.9% in July to 8.8%.
The Riksbank decision came a week after it started buying corporate bonds in the secondary market. The bank is buying assets worth more than $1.1 billion, which was a controversial move.
The USD/SEK is also rising because of the overall stronger dollar. The greenback is up by more than 0.30% today as the level of risks in the market increase.
USD/SEK technical analysis
The daily chart below shows that the USD/SEK pair has been in an upward trend after it formed a hammer pattern in August. The price has moved above the 20-day and 10-day exponential moving averages. It is now at the 23.6% Fibonacci retracement level and is in its second consecutive day of gains. Most importantly, the pair has moved above the previous resistance level at 8.8527. Therefore, there is a likelihood that the pair will continue rising as bulls aim for the next resistance at 9.000.