February 19, 2019 / 10:46 AM / in 2 months

FOREX-Swedish crown hits lowest level since 2016

* Crown falls 1 pct vs euro and dollar after weak inflation data

* Euro down 0.2 percent with further poor data expected

* BOJ will consider further easing if rising yen hurts economy

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh (Recasts with Swedish crown, adds quote, chart, updates figures)

By Tom Finn

LONDON, Feb 19 (Reuters) - The Swedish crown plummeted on Tuesday after weak inflation data prompted investors to sell the currency and scale back bets on an interest rate hike this year.

The currency rose last week after Sweden’s central bank broke with growing caution among major monetary-policy makers by saying it would stick to its plan to raise rates in the second half of 2019.

But the krona plunged more than 1 percent on Tuesday to a two-year low against the dollar at 9.3695, after the pace of inflation dipped in January.

Against the euro it was headed for its biggest daily decline in more than 15 months.

“The crown outlook is getting more and more worrisome by the week, the 10.75 to 11.00 range should not be ruled out in EUR/SEK later in 2019,” said Andreas Larsen, a strategist at Nordea Markets.

The euro fell broadly as investors shifted focus from progress in U.S.-China trade talks to an economic slowdown in the eurozone.

The single currency had been buoyed on Monday as expectations grew for an easing of the U.S.-China trade conflict. But euro zone bond yields, notably those of German bunds, fell amid the cloudy European economic outlook, weighing on the euro.

When ECB policymakers meet on March 7 they are expected to slash growth and inflation projections as the euro zone suffers its worst slowdown in half a decade.

“The euro is facing a tough week,” said Societe Generale strategist Kit Juckes. “Today, we get EU Commission forecasts, which will only tell us what we already know - the economy’s lost momentum and inflationary pressures remain non-existent.

“EUR/USD is likely to drift below $1.13, but probably not below $1.12,” Juckes said.

The euro was down 0.1 percent at $1.1309. It edged up 0.16 percent overnight, pulling away from a three-month low of $1.1234.

Traders are betting on a weaker euro in coming months, expecting the ECB to maintain its easy monetary policy amid slow growth, tepid inflation and political uncertainty.

Elsewhere, the yen weakened to 110.715 against the dollar from 110.45 after Japan’s central bank governor raised the possibility of further policy easing.

Bank of Japan Governor Haruhiko Kuroda told the Japanese parliament the central bank was ready to ramp up stimulus if a rising currency hurts the economy and keeps Japan from hitting the bank’s 2 percent inflation target.

Reporting by Tom Finn Editing by Larry King and David Holmes

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