SEK: Riksbank intervention on the cards – Rabobank

By FXStreet FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, notes that the Sweden’s Riksbank yesterday sharpened its sword in the latest round of currency wars.

Key Quotes

“The Riksbank announced that the Governor together with the First Deputy Governor will now be able to take the decision to instantly intervene in the currency market if it deems it necessary. Previously, a board meeting would have to be convened in order to decide on intervention. In its statement the Riksbank stresses that “since the last monetary policy meeting in mid-December, the Swedish krona has appreciated against most other currencies”.

With respect to usual monetary policy measures, the Riksbank could be running out of road. This is partly because the Riksbank’s repo rate is already well below zero at -0.35%, partly due to the fact that it has already purchased large amounts of government bonds in a programme that its already scheduled to run into 2016 and partly because the very low interest rate environment is fuelling household debt which is enhancing the vulnerabilities of the economy.

If the Riksbank were to lower the repo rate further, it would risk adding fuel to the fire. As the ratio of household debt to income rises, the …read more

Source:: FX Street