Sweden Prepares For FX "War" With Bloodthirsty Hedge Funds

Tyler Durden's picture




 

On Monday, the Riksbank said it would “instantly intervene” in the FX market in the event ongoing krona strength ends up imperiling Sweden’s inflation target.

“During 2015, the Riksbank has cut the repo rate to –0.35 per cent, adjusted the repo-rate path downwards and purchased large amounts of government bonds and also announced additional purchases during the first half of 2016,” the bank said, in a statement. “However, since the last monetary policy meeting in mid-December, the Swedish krona has appreciated against most other currencies [and] if this development were to continue, it could jeopardise the ongoing upturn in inflation.”

As a reminder, Sweden is caught between a rock and a hard place.

The Riksbank - like the SNB, the Norges Bank, and the Nationalbank - is effectively beholden to the ECB. When Draghi eases, Stefan Ingves must ease as well or risk “undesirable” currency appreciation. In other words, in the endless, beggar thy neighbor race to the Keynesian bottom, it’s ease or be eased upon (so to speak), as everyone fights to stay alive in the ongoing global currency wars.

Despite the Riksbank’s best efforts to appease an angry Paul Krugman who, prior to Ingves’ relent and subsequent plunge into NIRP-dom, accused the bank of being what he calls “sadomonetarists,” Sweden has struggled to push inflation higher and keep a lid on the krona in the face of Mario Draghi’s €1.1 trillion asset purchase program and attendant move to cut the depo rate into negative territory.

Meanwhile, negative rates have inflated a massive housing bubble that Ingves is powerless to rein in thanks to the fact that tightening not only risks pushing inflation to zero, but also incurring the wrath of the world’s Paul Krugmans who would, without a doubt, point the “sadomonetarist” finger on the way to claiming that the bank is about to make the same mistake it made in 2010 (when it hiked "prematurely). 

Having run out of options on the inflation front, the bank has effectively given Ingves and his first deputy governor Kerstin af Jochnick the power to intervene immediately to drive the krona lower. Previously, a board meeting would have been necessary if the bank wanted to step into the market.

"The Riksbank could intervene at any time and wants to be unpredictable," Anna Breman, chief economist at Swedbank, told Bloomberg by phone. "Currency interventions are politically controversial [and] may also be very costly and create big losses on balance sheet," she added. "Riksbank FX intervention is a done deal if SEK appreciation trend continues, and is likely to be backed by further rate cuts," Stefan Mellin, an analyst at Danske Bank, wrote on Monday. "Expect Riksbank to respond if the late-Dec. trend continues at the same pace, taking EUR/SEK toward 9.00-9.10 and/or the KIX index much more than 2% below its 1Q forecast," he said.

Unfortunately for Ingves, hedge funds are adept at smelling blood in the FX waters (just as George Soros). As Bloomberg writes, the 2 and 20 crowd "may be gearing up to place bets against the Swedish central bank’s efforts to halt gains in the krona." Here's more: 

“The market seems eager to challenge the Riksbank and there are rumors that many foreign hedge funds are long kronor and see a weakening of the krona after a possible intervention as a good buying opportunity,” he said. Exporters are also “structural krona buyers” and will probably exchange their foreign revenue after a dip, he said.

 


 

The Riksbank on Dec. 30 warned it was moving closer to intervening after the krona appreciated last month. On Monday, it sent out a statement that it had delegated the authority to Governor Stefan Ingves and his first deputy to “instantly” intervene in the market if necessary.

 

The Riksbank will probably need to contact primary dealer banks to warn them before it steps into currency markets, according to SEB, Swedbank and Danske Bank.

 

A currency intervention must now be “very close” and a tolerance level of between 9.00 and 9.10 “seems reasonable,” Javeus said. The bank will probably have to sell 2 billion kronor ($235 million) to 3 billion kronor to have any reasonable effect, he said.

In essence then, Ingves is now at war with the ECB and with hedge funds keen on testing the Riksbank's mettle.

With Sweden's QE program having already failed (see here and here), it now appears the Riksbank will soon be forced into a costly fight to keep the krona artificially suppressed. If Ingves loses the battle, deflation will be right around the corner (well, except in the housing market).

On the bright side, the inexorable influx of Mid-East migrants may end up causing Sweden to borrow more, thus creating more monetizable assets for the Riksbank's broken QE program.

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Tue, 01/05/2016 - 15:23 | 7001303 stocktivity
stocktivity's picture

It's almost 3:30. Everything will be fine.

Tue, 01/05/2016 - 15:28 | 7001329 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

I wonder. The one thing that affluent white people apparently are not allowed to do is to steal from other affluent white people.

Then, there tend to be genuine consequences.

Tue, 01/05/2016 - 15:30 | 7001340 willwork4food
willwork4food's picture

I gave this a 5 star just because of the "nasty" blond pic. Oh my.

Tue, 01/05/2016 - 15:45 | 7001433 swass
swass's picture

Come on guys.  Don't talk about my girlfriend that way.

Tue, 01/05/2016 - 16:11 | 7001582 LowerSlowerDela...
LowerSlowerDelaware_LSD's picture

Sadly she will soon be required to wear a burka in public.

Tue, 01/05/2016 - 16:36 | 7001685 fukidontknow
fukidontknow's picture

Sure will be "nasty" after 1000 randy arab/north african refugees!

Tue, 01/05/2016 - 16:47 | 7001733 COSMOS
COSMOS's picture

Maybe she can write in white arabic letters NASTY over her burqah in that region.

Tue, 01/05/2016 - 22:45 | 7003071 Tarshatha
Tarshatha's picture

You will forget about your Jew orchestrated cultural rape if Jews on high crush your currency.

See how it works, lay down and endure the genocide or we'll crush you financially.

By the way of deception Goyim.

Tue, 01/05/2016 - 15:31 | 7001342 Haus-Targaryen
Haus-Targaryen's picture

Seems fair to me. 

Tue, 01/05/2016 - 17:55 | 7001985 Escrava Isaura
Escrava Isaura's picture

 

 

Eirik Magnus Larssen: one thing that affluent are not allowed to do is to steal from other affluent. Then, there tend to be genuine consequences.

 

Exactly. Watergate is the best example.

 

Tue, 01/05/2016 - 18:34 | 7002124 zaphire999
zaphire999's picture

You're fucking kidding me

Exactly. Watergate is the best example.

Is that the BEST example?  Hahahaahahhaha ..

No wonder Brazil is a fucking basket case.

How about QE as an example .. silly Brazilian.

Tue, 01/05/2016 - 19:53 | 7002411 Escrava Isaura
Escrava Isaura's picture

 

 

Lovely your lack of curiosity. And that you don’t understand power.

You are an US engineer, I am assuming. Three great friends of mine were engineers. Two were Americans. One a Brazilian, but educated in France. The two American engineers were, one got killed, very successful, great, and fun individuals to hang around with, but both had the absolutely worst intuitions. To this day I don’t know why. The Brazilian engineer had a much better grasp of situations. Of the unseen dynamics.

 

Anyway, I will leave with this quote for you to get ‘Curious’ about it:

 

“Imagination is more important than knowledge. For knowledge is limited to what we now know and understand, while imagination embraces the entire world, and all there ever will be to know and understand.” — Albert Einstein

 

Now, affluence versus affluence:

https://www.youtube.com/watch?v=IGIYam3p-Yc

 

 

Tue, 01/05/2016 - 18:30 | 7002099 zaphire999
zaphire999's picture

I wonder. The one thing that affluent white people apparently are not allowed to do is to steal from other affluent white people.

Then, there tend to be genuine consequences.

Eirik .. I know you may not come from an English speaking country, but the above statement is completely dumb shit.  I believe what you are trying to say is that, wealthy white people steal from other wealthy people and this should not be tolerated?

I don't pretend to know who or what you are talking about.  Most of your comments on this forum are idiotic, naive, and completely stupid.  If Africa, most of Asia and South America are much the same as us whites, then why after so many years of liberated free living are these people still dead broke and living like maggots on a shit heap? 

Eirik, you are an imbicile.  The next time you look at yourself in the mirror try to realise your psychological dysfunction.

Sweden is no more a postor child for liberal success as any other country.  Your ideals are phoney, your morals just as corrupt as any other poor 'black man' or 'repressed Asian'.  

https://youtu.be/YZL3axcwDz8

 

Tue, 01/05/2016 - 15:35 | 7001363 HedgeAccordingly
Tue, 01/05/2016 - 15:39 | 7001383 jakesdad
jakesdad's picture

do you think it's even humans at this point or just a crontab entry?

 

25 15 * * 1-5 /home/ppt/prop.py  --s\&p=2000

Tue, 01/05/2016 - 15:46 | 7001440 SheepRevolution
SheepRevolution's picture

Swedish guy checking in here. Even at these housing price levels, a small majority still think we DON'T have a housing bubble in Sweden and the prices will continue up forever. I don't know what it is about my many of my countrymen, but many Swedes, tend to believe yhey can manage things better than other countries. For instance, socialism. There are countless off examples off countries who have collapsed because the took the socialist train. But for some reason, Swedes believe their officials know things better. Same thing with monetary policy, and policy regarding real estate. If the government officials say they have things under control, a mojority of Swedes will believe them. It's embarrising to live in this country these days and be associated with Sweden.

Tue, 01/05/2016 - 15:56 | 7001496 Dr. Bonzo
Dr. Bonzo's picture

I feel sorry for you dude. You had a gorgeous country, a proud history, incredible traditions... all tossed out in less than 20 years. You flushed 2000 years of history out the fucking window in TWENTY years without so much as a whimper. WHAT THE FUCK ARE YOU PEOPLE THINKING??? It's hard to look at people and size them up and match their historical legacy with the feeble-minded mumbling bumbling lying scheming shitbirds who run the place now and imagine these are the descendants of people who circumnavigated the North Atlantic 1000 years before Columbus and made all of Europe tremble in fear at the mere whisper of their name.

Unreal........

 

Tue, 01/05/2016 - 16:22 | 7001635 BlussMann
BlussMann's picture

Sweden got an advanced case of Jewitis - like the JewSA. Dr. Barbara Lerner Spectre and her coven are treating the patient.

Tue, 01/05/2016 - 17:20 | 7001851 bentaxle
bentaxle's picture

The Icelandic example shows what can happen with those kinds of "attitudes."

Tue, 01/05/2016 - 15:24 | 7001305 falak pema
falak pema's picture

Sweden heading for the "GReek wars"

Tue, 01/05/2016 - 15:25 | 7001307 yrad
yrad's picture

<<<<<<Brazilian

<<<<<<Swedish

 

 

*Click Bait Poll

Tue, 01/05/2016 - 16:40 | 7001626 Money Boo Boo
Money Boo Boo's picture

<<<<<EU goes down the shitter first

<<<<<USSA starts WWIII before that happens

 

 

Does the "Walstrom affair" not also tie into this FX issue becasue od Swedens condemnation of Saudi Arabia as well? With USSA hedge funds being the vultures to exact justice for the House of Saud???

Tue, 01/05/2016 - 17:51 | 7001947 Kirk2NCC1701
Kirk2NCC1701's picture

Brazilians won't do an "Assange" on you, i.e. inviting you for 3-way sex, then complain about rape and have you turned over to the US for Wikileaking.

Nor turn you into a pussified Eirik Magnus Larsdotter.

Sweden, unless you bring back Odin, Thor and Ragnar Lothbrok, you are fucking 'toast'.  Arabic, flatbread toast.

Tue, 01/05/2016 - 18:00 | 7002005 Escrava Isaura
Escrava Isaura's picture

 

 

Obviously that you don’t k know women, at least well.

 

Tue, 01/05/2016 - 18:37 | 7002130 zaphire999
zaphire999's picture

Try English, and if you can't manage that then fuck off to a Brazilian site.

Nothing worse than a stupid liberal fucker trying to argue a point in a language they can't speak.

 

Tue, 01/05/2016 - 19:52 | 7002427 Escrava Isaura
Escrava Isaura's picture

 

 

You ought to know, and do better than that.

 

Tue, 01/05/2016 - 15:29 | 7001335 XuscitizenSweden
XuscitizenSweden's picture

"......On the bright side, the inexorable influx of Mid-East migrants may end up causing Sweden to borrow more, thus creating more monetizable assets for the Riksbank's broken QE program. "

____________________________________________________________________________

Ain't gonna happen. The current minority government is in shambles.

I expect the present gov't coalition will fall this year.

New Elections & refugee-invaders-migrants WILL be deported.

The SD-Sweden Democrats are now the largest  voting block among Swedish Men. Over 55% of the Swedes want now a reduction of immigrant/invaders coming into the country.

 

Tue, 01/05/2016 - 15:51 | 7001471 Hobbleknee
Hobbleknee's picture

Will never happen. This is a planned implosion.

Tue, 01/05/2016 - 15:37 | 7001360 Soul Glow
Soul Glow's picture

The race to the bottom is in hyperdrive.

Africa has almost no dollar reserves.  China is dumping $20b into their equity market just to float the lien, and the Fed hasn't - and CAN'T - raise rates.

GAME OVER

Tue, 01/05/2016 - 15:39 | 7001391 Niall Of The Ni...
Niall Of The Nine Hostages's picture

I don't suppose anybody at the Riksbank got on the phone and asked the Swiss how well fighting the ECB worked out for them? Or is this time differemt?

Tue, 01/05/2016 - 15:40 | 7001393 buzzsaw99
buzzsaw99's picture

1000 muzzies named willy groper are heading toward that girl at this very moment

Tue, 01/05/2016 - 15:41 | 7001401 blue51
blue51's picture

Yes. She is a Beautiful looking woman, for sure.

Tue, 01/05/2016 - 15:52 | 7001480 Everybodys All ...
Everybodys All American's picture

Maybe they better prepare to fight the Muslim hoard in their streets instead.

Tue, 01/05/2016 - 16:03 | 7001539 BarkingCat
BarkingCat's picture

Why don't they wake up and treat an attack on their currency as an act of war. It is exactly that.

I will never understand why Great Britain did not put a bullet in George Soros' head back when he trashed the pound.

They should have done it first and then announced it after the fact. Put out a press release explaining that the attack in the nation's currency is an act of war and the aggressor has been eliminated.

I guarantee you that a nation that does that will not have to worry about some hedge fund parasite destroying the fiscal well being of their citizens.

Tue, 01/05/2016 - 16:15 | 7001599 Mr.Kowalski
Mr.Kowalski's picture

Nobody here cares about Sverigne Riksbank.

Just keep the hottie pics and your readership skyrockets

Tue, 01/05/2016 - 16:23 | 7001639 Yen Cross
Yen Cross's picture

  I wouldn't touch this trade with one of those self landing rockets Musk builds. There's just too many moving parts.

 It's stupid for central banks to telegraph their intentions in F/X matters, which makes me wonder if they're going to do some kind of SNB redoux. Sucker all hedgies in and then drop the bomb on them.

Tue, 01/05/2016 - 19:10 | 7002292 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

time to buy wayy outta the money calls & puts on this bitch

 

 

Tue, 01/05/2016 - 16:35 | 7001682 JenkinsLane
JenkinsLane's picture

"1..., 2..., 3..., 4..., I declare Global Currency War!"

Tue, 01/05/2016 - 21:50 | 7002884 Chipped ham
Chipped ham's picture

Sveridge is in no more hot water than any other DM. Once one goes, they all go. 

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