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LONDON - The Swedish crown firmed on Thursday after the country's central bank raised rates, forecast further hikes and said it wanted a stronger currency, while the dollar also weakened against most other currencies amid positive sentiment across markets.
The dollar was last down 2% against the crown at 10.39 crowns and the euro was down 1.5% at 11.7, set for its biggest daily percentage fall since 2015, after the Riksbank raised its benchmark interest rate by 50 basis points to 3%, and forecast more increases in the spring.
The central bank also said a stronger currency would be desirable to bring down inflation.
"All this is very positive for SEK (the crown), but it's unlikely to turn the tide too much if it's met with a correspondingly hawkish ECB," said Simon Harvey, head of FX analysis at Monex Europe.
The Swedish currency has been under pressure, having hit its weakest since 2009 against the euro earlier this week as markets bet the central bank will raise rates less aggressively than the European Central Bank.
"The idea is that because of the amount of leverage in Sweden's housing market it's much more difficult for them to follow the ECB much above 3%," said Harvey.
Elsewhere, the euro climbed 0.43% to $1.076, and the pound rose 0.63% to $1.215 both boosted by improving risk sentiment across markets.
The Australian dollar, often seen as a proxy for risk sentiment, rose 0.77% to $0.6977 as the safe-haven U.S. currency dipped in line with a rally in equities and other so-called "risk-friendly" assets, helped by strong company earnings.
The pound was largely unmoved by Bank of England policy makers expressing a wide range of views about Britain's inflation trajectory and need for rate hikes before a panel of lawmakers.
Inflation was also in the mix for the euro after German inflation data came in below expectations.
The dollar also slipped 0.4% against the Japanese yen to 130.9.
Japan's government is planning to present the new Bank of Japan governor nominee to parliament on Feb. 14, broadcaster TBS reported on Thursday. Markets are closely watching the appointment, as on the new governor's agenda will be how quickly the central bank could phase out its massive stimulus.
Markets are also digesting a series of remarks from Federal Reserve policymakers about its interest rate plans after Friday's stronger-than-expected jobs data and ahead of next week's closely watched inflation numbers.
U.S. jobless data is due later on Thursday, and will provide another data point for the Fed and markets.
(Reporting by Alun John in London, additional reporting by Ankur Banerjee in Singapore and Kevin Buckland in Tokyo; Editing by Kim Coghill, Arun Koyyur and Emelia Sithole-Matarise)