Macrosnap of Sweden’s central bank’s krona strategy and how they are protecting their currency from getting too strong?

  • Central Bank worried about currency getting too strong (as euro weakens and investors seek higher returns).
  • So have made (by announcement) policy interest rates more negative (i.e. depositors need to PAY to have their money in banks) hence making krona less attractive for foreign investors.
  • Central bank also expanding its bond buying program (QE), i.e. aggressively buying krona-denominated bonds from the market (this results in a flood of krona into the market, hence if anyone wants to own krona, there are plenty available - this is an effective form of currency intervention, but without the Central Bank actually having to be active in the FX market).

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