Sweden’s Debt Office announces krona purchase

Sweden’s National Debt Office (Riksgälden) announced plans to purchase up to 15 billion kronor ($1.9 billion) and increase its share of foreign currency debt in an effort to reduce the costs of servicing Sweden’s government debt.

“The krona has weakened sharply during the autumn and is now historically very weak,” the Debt Office said in a statement.

“In our view, the krona exchange rate is far from the levels that can be justified by more fundamental conditions. It should therefore be possible for it to strengthen considerably over time.”

On Wednesday, the krona reached historic lows against the euro, trading for as many as 11.13 kronor per euro before closing at 10.94.

As the krona has weakened against the euro, the costs of paying for Sweden’s 233 billion kronor worth of foreign debt has risen steadily throughout the autumn.

The Debt Office hopes that by buying krona while the currency is relatively undervalued and then selling following an expected appreciation, the agency can help reduce the costs of Sweden’s debt.

The agency said it plans to carry out the purchases gradually through the first quarter of 2009.