Swedish krona rallied against the euro after the Riksbank said it would keep interests at record low - at least until the summer.

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The Executive Board of the Riksbank decided -- as expected -- to leave the repo rate unchanged at record low 0.25 per cent, it said in a statement Thursday. 

Sweden’s krona surged to the strongest in almost 15 months against the euro after the announcement. The price of 1 euro is now below 10 kronor.

At the same time, the assessment now is that the upturn in economy activity rests on more solid ground and that there are therefore sound reasons for increasing the repo rate somewhat sooner than was assessed in December.

The Riksbank will therefore begin to raise the repo rate. The first hike is expected this summer.

The repo rate is now likely to be at 1.1 percent in the first quarter of 2011 and 2.8 percent in the first quarter of 2012, compared with earlier forecasts of 0.8 percent and 3.0 percent.

"In Sweden, inflation has increased in recent months and the development of the labour market does not appear to be as weak as was previously estimated. At the same time, the situation on the financial markets has steadily improved", the central bank.

Average unemployment is now forecast to peak at 9.4 percent in 2010 before falling back to 9.1% in 2012.