FX:EURSEK Euro Fx/Swedish Krona
And what a bounce it was. At 12:45GMT the Riksbank cut the repo rate by 15bps down to -0.25% while announcing the purchase of SEK30bn government bonds. I had expected them to prefer further cut(s) alongside bond purchases over currency intervention but I did not expect it so soon and at this level. While the board expressed willingness to cut the repo rate further, they are surely near the limit of negative interest rates and any further cuts risk an adverse change in the behaviour of banks and the public. Governor Ingves however does not expect the latest cut to be a problem, saying he does not believe the negative rate will lead to deposit withdrawals by the public. Meanwhile currency intervention would be a risky and very expensive measure; the board will surely take into account the Swiss experience - we all know how that ended! This would only invite speculation against the Riksbank. If the latest round of measures isn't enough to sufficiently weaken the crown, we can surely expect bond purchases significant in size to the Swedish bond market, that is, assuming we are close to the limit of negative interest rates in Sweden.