Swedish krona weakest against euro since 2009

The Swedish krona on Wednesday hit its weakest value against the euro since the 2009 financial crisis. One euro cost 11.69 krona, reported Xinhua.

"Small currencies, including the Swedish krona, are usually strengthened when there is a risk appetite and the stock exchange is on the rise. In an uncertain economic situation, they often weaken, while the dollar is strengthened," Claes Mahlen, chief strategist at Handelsbanken bank, told Dagens Nyheter (DN) newspaper.

The uncertainties in the Swedish property sector and the interest rate could also be contributing factors, Mahlen said.

Consequently, Swedes on holiday this summer will have less purchasing power, and imported goods will also become more expensive -- which in turn will make it harder for the Swedish central bank (Riksbank) to curb inflation, Mahlen noted.

He said that the Riksbank may find it hard to buck the trend. "It is much easier to weaken a currency than to strengthen it."

In 2022, Sweden's inflation rate was considerably higher than the Riksbank's 2-percent target. According to Statistics Sweden, year-on-year inflation stood at 10.5 percent in April.

After keeping the policy interest rate at zero or sub-zero levels for over seven years, the Riksbank has been continuously raising the rate since last May to currently 3.5 percent to curb inflation.

On Tuesday, the Swedish financial supervisory authority (Finansinspektionen, FI) released a report saying that the current economic situation has exposed vulnerabilities in the country's financial system.

According to the report, several years of low inflation and low interest rates have led to high risk-taking among households and companies, which has resulted in high prices for housing and commercial properties - as well as in rapidly rising debts.

Now, when households and companies are pressured by high inflation and rising interest rates, vulnerabilities have quickly become apparent, the report said.