Norwegian crown sinks on inflation surprise

Reuters

LONDON, Jan 10 (Reuters) - The Norwegian crown fell sharply on Friday while Sweden's crown recovered most of this week's losses after data gave conflicting signals on the strengths of the two Nordic economies.

Norwegian inflation came in well below market consensus, adding to the case for the central bank to hold off with any rise in interest rates and pushing the oil-rich country's currency down around 0.4 percent against the euro and dollar.

Swedish industrial output, by contrast, defied forecasts for a 2.3 percent annual fall in November and rose 3.5 percent. That allowed the Swedish crown, hammered after the central bank appeared to leave the door open to another interest rate cut on Wednesday, to recoup around 0.5 percent against the euro.

"A rate cut in Sweden could have come from either lower inflation or a shortfall in growth and the production numbers seem to have removed one of those risks," said Arne Lohmann Rasmussen, head of FX research with Danske Bank in Copenhagen.

"The forward-looking surveys in Sweden had been good, but the hard data like industrial production had lagged and it may be that this is the turning point."

In Norway, the central bank in early December pushed back its timeline for a first hike in interest rates by a year, hoping to boost growth and guide what has been one of Europe's strongest economies through some unexpected turbulence.

Economists said the data would reduce pressure on the bank to hike rates and could even give it room to cut if the economy weakens further. The bank next meets on policy in March.

After falling around 0.4 percent immediately after the data, by 0940 GMT, the Norwegian crown traded 0.1 percent down on the day against the euro and dollar at 8.4075 and 6.1827 respectively.

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