Swedish Krona Soars on Debt Office Bet as Riksbank Cries Murder

Sweden’s krona soared after the debt office announced it will position for a stronger exchange rate, inserting itself into a debate over whether the central bank has been damaging Sweden’s economy with its efforts to weaken the currency.

The agency will build up a position as big as 7 billion kronor ($800 million) gradually and at various exchange-rate levels, according to a statement on Friday. The krona gained 0.8 percent to 10.187 per euro as of 11:09 a.m. in Stockholm.


In an interview while at the Riksbank’s 350th anniversary party on Friday, the director general of the Swedish National Debt Office, Hans Lindberg, said it’s within the agency’s mandate to take a position on the krona to keep down costs. He declined to say whether he had discussed the move with the Riksbank ahead of time.

Sweden’s krona has plunged close to a record low this year as the central bank prolonged its experiment of negative rates. The bank has been working over the past years to keep the currency weak in order to spur inflation.

Read More: Investors concerned about the weak krona

Stefan Mellin, an analyst at Danske Bank A/S, said the debt agency was earlier turned down when it asked the government for an enlarged mandate to take positions in the krona, in part after the Riksbank thought it would be at odds with monetary policy. “So in that respect this is a barn burner, that they go through with this,” he said. “This is clearly at odds with the Riksbank’s interest, which is surprising.”

Riksbank Deputy Governor Cecilia Skingsley declined to comment, saying “we will let the birthday child speak for itself,” referring to the day’s festivities. The bank is hosting a conference on Friday with Federal Reserve Governor Jerome Powell and the Bank of England’s Mark Carney among others.

Deputy Governor Per Jansson, opted for some gallows humor, walking up to Lindblad at the conference in front of reporters and saying, “It’s also said that the murder of Gustav III was the fault of the debt office.”

The debt office was created to fund the king’s war with Russia in 1778. Back then, the agency issued a lot of bank notes, leading to “a lot of trouble” and triggering a string of events that ultimately resulted in the murder of the king at a masquerade ball, according to the Riksbank.

The debt office also took a tactical position on the krona back in 2009, when it bought 50 billion kronor.

“This is a much smaller amount compared to the last time they took a position for a stronger krona, and that time they didn’t have the Riksbank against them,” Mellin said. “So now there is an opposition against this decision. One shouldn’t underestimate the signal value of this and we might get a follow through in the move of the krona.”

LISTEN TO ARTICLE 2:29 Share Share on Facebook Post to Twitter Send as an Email Print

Leave a Reply

Your email address will not be published.