The Swedish krona weakened today amid speculations that the nation’s central bank will cut interest rates on its next policy meeting later this month. Uncertainty about the situation in Europe makes traders avoid riskier currencies, especially those of European countries.

The Riksbank (Sweden’s central bank) cut its key interest rate by 25 basis points to 1.25 percent last month. The bank’s policy makers thought that they will keep rates stable and may even increase them next year. Now, after data showed that the nation’s economy declined last month, traders think that borrowing costs will become lower, not higher.

The central bank explained that its decision to cut interest rates in September was caused by the worsening crisis in Europe. While the situation showed signs of positive developments, it is in no way certain that the worst are already behind and the bank may yet be forced to lower lending rates yet again.

USD/SEK rose from 6.6077 to 6.6837 and EUR/SEK went up from 8.5378 to 8.6222 as of 19:06 GMT today.

If you have any questions, comments or opinions regarding the Swedish Krona, feel free to post them using the commentary form below.