MUFG's report, authored by Lee Hardman, Senior Currency Analyst, addresses the recent strength of the Swedish Krona and the Riksbank's response. Following strong gains, the Riksbank has expressed concern over the potential for disinflation risks due to the strengthening Krona. Minutes from the last policy meeting indicated that a rate cut could be considered if inflation continues to fall. This has led to a correction in the Krona's value against the Euro.

Riksbank's response to currency strength

"After such strong gains, the ongoing strength of the krona is starting to attract more concern amongst Swedish policymakers."

"Yesterday’s minutes revealed that Riksbank Deputy Governor Per Jansson couldn’t rule out voting for a rate cut at the next policy meeting on 18th March."

"The dovish comments from the Deputy Governor have encouraged the Swedish rate market to price back in a higher likelihood of further rate cuts this year, and triggered a sharp correction lower for the krona."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)