Swedish krona tumbles on weak inflation, Italy woes hit euro

London

THE Swedish krona plummeted on Tuesday after weak inflation data prompted investors to sell the currency and scale back bets interest rates would rise this year, while poor Italian industrial orders knocked the euro lower.

The krona rose last week after Sweden's central bank broke with growing caution among major monetary-policymakers, saying it would stick to its plan to raise rates in the second half of 2019.

But the it plunged more than 1 per cent on Tuesday to a two-year low against the dollar at 9.3695, after a report showed inflation fell in January.

Against the euro, it was headed for its biggest daily decline in more than 15 months and touched its weakest since September.

"The crown outlook is getting more and more worrisome by the week. The 10.75 to 11.00 range should not be ruled out in EUR/SEK later in 2019," said Andreas Larsen, a strategist at Nordea Markets.

The euro, already lower as investors shifted focus from progress in US-China trade talks to European economic weakness, fell further after data showed Italian industrial orders dropped 5.3 per cent in December from December 2017.

The euro had gained on Monday as expectations grew for resolution of the US-China trade conflict.

But eurozone bond yields, notably those of German bunds, fell amid the cloudy European economic outlook, weighing on the euro.

When European Central Bank policymakers meet on March 7, they are expected to slash growth and inflation projections.

"The euro is facing a tough week," said Societe Generale strategist Kit Juckes. "Today, we get EU Commission forecasts, which will only tell us what we already know - the economy's lost momentum and inflationary pressures remain non-existent.

"EUR/USD is likely to drift below US$1.13, but probably not below US$1.12," Mr Juckes said.

The euro skidded 0.3 per cent to as low as US$1.1275, near a three-month low of US$1.1234.

Elsewhere, the yen weakened to 110.765 against the dollar from 110.45 after Japan's central bank governor raised the possibility of further policy easing.

Haruhiko Kuroda told the Japanese parliament the central bank was ready to ramp up stimulus if a rising currency hurt the economy and kept Japan from hitting the bank's 2 per cent inflation target. REUTERS