Forex - Swedish krona rises as Riksbank raises interest rates to 4.00 pct UPDATE

Forex - Swedish krona rises as Riksbank raises interest rates to 4.00 pct UPDATE

	Published : Tue, 30 Oct 2007 10:47 By : Agencies Print this Story

(Updating to add further analyst comment)

LONDON (Thomson Financial) - The Swedish krona rose after the Riksbank raised its key repo rate by 25 basis points to 4.00 pct as expected and reiterated that rates will need to rise again during the first half of next year.

Explaining the move, the central bank cited strong growth and rising employment levels, as well as 'rapid' increases in lending and house prices, which are leading to a rise in inflation expectations.

'The Swedish Riksbank's decision to raise interest rates again this morning reiterates the fact that some central banks have been largely unaffected by the financial market turmoil and weakening global outlook,' said Ben May at Capital Economics.

The report is 'a bit more hawkish' than anticipated, given that the projected path for interest rates is slightly higher than that published back in June, he said.

'Overall, then, a fairly strong statement of intent from the Riksbank, which should give the Swedish krona some near-term support,' he said.

At 9.53 am GMT, the Swedish krona was stronger, trading at 6.3705 per US dollar from 6.4003 just ahead of the announcement and at 9.1682 per euro, from 9.2217 previously. Immediately after the decision, the Swedish currency hit highs of 6.3548 against the dollar and 9.1598 against the euro.

Data released this morning meanwhile confirmed the strength of the Swedish economy, with retail sales jumping by 2.6 pct in September from August and by 9.9 pct year-on-year.

'These figures are very strong and are above both our expectations and the market in general and highlight the relentless strength of the Swedish economy,' said Martin Miller at Thomson IFR Markets.

jessica.mortimer@thomson.com

jkm/jrr/jkm/jag

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.