Riksbank likely to accept gradually stronger SEK against EUR through 2016

The Swedish central bank, Riksbank, has given enough proof that it is quite responsive with regard to inflation risks. Therefore, it is likely that the central bank might continue to manage preventing a rapid, unwanted and robust strengthening of the Swedish krona in the quarters ahead if it becomes necessary, stated Commerzbank in a research report.

Since late 2015, the EUR/SEK pair has not dropped below the 9.10 level. The market is not testing the central bank’s pain threshold, suggesting that the market considers the Riksbank to be credible. If there is a risk of the Swedish krona strengthening quite rapidly and strongly against the euro, the Riksbank is expected to further ease its monetary policy.

The central bank had mentioned that to this aim it might further lower its key rate, expand its asset purchases or even intervene in the FX market. However, the possibility of intervention has diminished since the krona has come under the depreciation pressure recently after the Brexit vote and weaker growth data, said Commerzbank.

Furthermore, the Swedish central bank would be able to accept an appreciating krona the higher inflation data comes out to be. Thus, through the course of the year, the Riksbank is expected to accept a gradually stronger SEK against the euro, according to Commerzbank.