Hedge fund Ambrosia is betting the Swedish central bank will let its guard down on the krona after turning the corner in its battle to revive inflation. As inflation expectations also head up, policy makers will be able to stake out more independence from the European Central Bank, which is forging ahead with even more levels of stimulusto spark inflation.
The 1.5 billion-krona ($185 million) Ambrosia fund is positioned for a krona strengthening and a widening in the yield spread on Swedish short-term rates over their Germancounterparts.
Swedish policy makers in April slowed the pace of its record bond buying program, while keeping rates unchanged at minus 0.5 percent. Several members on the bank’s board have indicated they are content to stand pat on stimulus amid growing concerns over soaring housing prices and the impact of negative rates. However, the Riksbank indicated that it may intervene in the fx market to prevent Krona from strenghtening too much.
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