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The Swedish krona is on track for its biggest one-day fall against the euro in six months, after the Riksbank surprised investors by announcing an extension to its bond-buying programme.

The central bank was widely expected to keep all its policies unchanged at its April meeting, but it announced this morning that it would ramp up bond purchases in the second half of the year, and pushed back its estimate of when interest rates will rise above their current record low of -0.5 per cent.

The bank’s executive board was divided on the decision, but the unexpectedly dovish conclusion prompted an immediate weakening of the krona, which has extended through the morning.

By publication time it was down 0.8 per cent, to SKr9.6304 per euro. That puts it on track for its biggest one-day drop since October’s Riksbank meeting, which also saw the central bank surprise markets by saying it would keep rates lower for longer.

The Riksbank is likely to welcome the move, as worries about krona appreciation have been a major factor in its cautious inflation outlook. A stronger krona drives down the cost of imports, which can have a large impact on the overall inflation rate in the trade-reliant economy.

There is still scope for further surprises today, however, with the European Central Bank’s own monetary policy decision and press conference due this afternoon.

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