Swedish crown slips on rate cut, dollar hits three-week high

By Reuters

Jul 02, 2015 07:31 AM EDT

The Swedish crown sank 1 percent on Thursday after Sweden's central bank surprised markets by cutting interest rates deeper into negative territory and saying it would pump more money into the economy, citing risks from Greece.

The dollar, meanwhile, hit a three-week high against a basket of major currencies, as investors geared up for a deluge of U.S. data that could back expectations for the Federal Reserve to lift interest rates and briefly steal the spotlight from the Greek debt crisis.

Sweden's Riksbank said that uncertainty abroad had increased and it was difficult to assess the consequences of the situation in Greece, while the Swedish crown has strengthened closer to levels when the Riksbank last cut rates.

"They have been quite aggressive in the QE (money printing) and its pretty clear that they are trying to target the currency and weaken it," said Niels Christensen, FX strategist at Nordea in Copenhagen.

A large majority of analysts in a Reuters poll had forecast the bank would keep its already ultra-loose policy unchanged after the latest inflation figures gave it some breathing room in its fight to fend off the threat of deflation.

The crown hit a three-week low against the euro and dollar following the Riksbank's announcements, trading down around 1 percent at 9.3700 and 8.4726 crowns respectively.

With U.S. markets closed on Friday for the July 4 Independence Day holiday, closely watched nonfarm payrolls data will come a day earlier than usual, along with durable goods and other numbers.

"This payrolls release is going to be the most decisive release we've had for some time -- we think the Fed is going to hike in September," said Sam Lynton-Brown, a currency strategist at BNP Paribas in London.

"If we get the upside surprise that we're expecting -- we're forecasting 250,000 -- then we think there could be a significant adjustment in U.S. front end rates, and ... there's a lot of potential for dollar upside."

The euro was flat against the dollar at $1.1053.

Greek Prime Minister Alexis Tsipras on Wednesday urged Greeks to reject an international bailout deal, souring hopes of any breakthrough as markets looked ahead to Sunday's referendum that might decide Greece's future in the euro zone.

Lynton-Brown added that, with it clear that the referendum would go ahead, and with euro zone finance ministers adamant that no further discussions would be held until after the vote, the euro was unlikely to move much on Greek news before Sunday.

Elsewhere, the New Zealand dollar skidded below 67 U.S. cents for the first time in five years as a slide in dairy prices narrowed the odds on more rate cuts. It traded down 0.9 percent at $0.6670.

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