Make Kitco Your Homepage

FOREX-Swedish crown plunges, dollar gains as central banks turn cautious

Kitco News

* Euro on track for weekly loss of 1.5 percent
* Strong U.S. jobs data seen adding to pressure
* Graphic: World FX rates in 2019 (Adds context, updates prices)

By Tom Finn

LONDON, March 8 (Reuters) - The crown fell to a 16-year low on Friday as the Swedish central bank joined its counterparts in Europe and Canada in adopting a cautious outlook. The euro nursed losses at a 20-month low.

Investors had expected broad-based weakness in the dollar this year after an unlikely rally in 2018 on a consensus view the U.S. Federal Reserve would put off raising interest rates.

The Fed did turn neutral earlier this year, but other central banks followed suit, maintaining a difference in interest rates that worked to the dollar's advantage.

This week, the European Central Bank offered a fresh round of cheap loans to banks, the Bank of Canada said the timing of future rate increases was increasingly uncertain, and Sweden played down expectations rates would rise.

"Yesterday the Riksbank suggested that its forecasts for repo rate hikes were simply that – a forecast but not a promise," HSBC strategists said in a daily note.

The crown fell to 9.4890 on Friday, its weakest since August 2002, a day after Swedish Central Bank Governor Stefan Ingves struck a dovish note in a statement to Parliament. Data showed Swedish house prices fell in the three month ending in February. EURO The ECB's decision to push back its first post-crisis interest rate increase to 2020 reverberated across financial markets, pulling bond yields across the eurozone lower.

The euro was marginally higher on Friday at $1.1209 but was headed for a 1.5 percent drop for the week, its biggest weekly decline in over a year.

On the other hand, the dollar reached a 2019 high against a basket of currencies overnight as traders bet the United States would fare better than Europe in coming months despite some soft patches in the U.S. economy.

That was reflected in the bond markets, where the yield gap between 10-year U.S. government debt and comparable German bonds widened to 258 basis points, its highest since December.

However, investors expect the dollar to drift before monthly U.S. jobs data. Economists polled by Reuters forecast 180,000 jobs were added in the United States last month. The data is due at 1330 GMT.

"Lower interest rate expectations in Europe mean a likely rise in the U.S. dollar. For now, U.S. labour market data decides how far this all goes," Societe Generale strategist Kit Juckes said.

(Reporting by Tom Finn; editing by Andrew Cawthorne, larry King)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.