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Swedish Krona and Danish Krone Depreciate after Inflation Reports

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Swedish krona exhibits sharp downward correction

The Swedish krona depreciated against the US dollar by more than 1% on December 10, 2015, as inflation levels released below estimates for November, increasing apprehensions that the central bank might cut the benchmark interest rates beyond the current level of -0.35% in order to stimulate price pressures.

Consumer prices in November released at 0.1% on an annual basis, remaining constant in comparison to the previous month and below the forecast of 0.2%. On a monthly note, prices traversed into a deflationary environment in November, contracting by 0.2%. Inflation had grown by 0.1% in October and was expected to remain flat. The central bank policy is expected to release on December 15, 2015, which will drive further movement in the Swedish krona.

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Danish krone fell on inflation report

Like the Swedish krona, the Danish krone fell against the US dollar on December 10, 2015, as inflation levels missed estimated targets in November. Consumer prices increased by 0.3% on an annual basis in November against a growth of 0.4% in October and a higher forecast of 0.5%. Denmark’s Nationalbank (DN) has been keeping lending rates low at 0.10% in order to spur growth in prices. The central bank also adjusted the growth estimates for 2015 and 2016 downwards to 1.4% and 1.8%, respectively, from the 1.8% and 2.1% it forecast earlier.

Impact on the market

Looking at the movement in the ETFs following the inflation reports, the iShares MSCI Denmark Capped ETF (EDEN) extended its loss on December 10, 2015. It fell 0.43%. On the other hand, the iShares MSCI Sweden ETF (EWD) closed in the negative zone for the fourth consecutive session, falling by 1.3%.

Among the Danish ADRs (American depositary receipts), Novo Nordisk B (NVO) rose 0.28%. Among the Scandinavian ADRs, Swedish company LM Ericsson Telephone (ERIC) ended on a negative note by 0.76%. Dutch company Koninklijke Philips Electronics (PHG) ended negatively. It fell by 0.57%.

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