The AUD/SEK currency pair pulled back from a one-week peak it scaled on Tuesday, after the Reserve Bank of Australia warned further policy tightening could not be ruled out since inflation was still elevated.
The Australian central bank left its cash rate without change at 4.35% at its February meeting, as largely expected.
Tuesday’s decision came after the RBA had delivered a total of 425 basis points of interest rate hikes over the course of two years to rein in a spike in inflation.
However, the exotic pair’s losses may be limited due to prospects of an earlier-than-expected rate cut by Sweden’s Riksbank.
The latter kept its key policy rate intact at 4.0% at its February meeting, in line with market expectations, and suggested that a rate cut could come earlier than previously expected, possibly even to the first half of 2024.
Capital Economics said that it expected rate cuts of 100 basis points to 3.0% by the end of this year and more cuts to 2.5% by the end of 2025.
As of 10:03 GMT on Wednesday the AUD/SEK currency pair was edging down 0.11% to trade at 6.8425. Yesterday the exotic Forex pair went up as high as 6.8992. The latter has been the pair’s strongest level since January 30th (6.9076).