Sweden's crown hit a two-year low against the dollar and a two-month trough versus the euro on Monday after voters elected a minority government, which could trigger political uncertainty in Scandinavia's biggest economy.
The crown fell to 7.1499 per dollar, its weakest since June 2012, and last traded 0.3 percent lower at 7.1460. It also softened to 9.2750 per euro in Asian trading, its lowest since early July.
It recovered to trade at 9.23 crowns per euro, with the single currency also struggling given the European Central Bank's ultra-loose monetary policy.
Currencies
Sweden's center-left Social Democrats emerged as victors in the election but fell short of a parliamentary majority, while the anti-immigrant far right emerged as the third-biggest party to hold the balance of power.
Given the uncertainty over decision-making, especially in fiscal policy, investors will price in some political risk premium, analysts said. But most of the crown's losses were likely to be against the buoyant dollar, rather than euro.
Aussie drops
The Australian dollar slid to a six-month low on worries about slower Chinese growth. Investors took aim at the Aussie, often used as a proxy for China plays, after data showed factory output in Asia's economic powerhouse grew at the weakest pace in nearly six years in August. Growth in other key sectors also cooled.
The Aussie fell below 90 U.S. cents for the first time since March 20 to trade at $0.8984, before recovering slightly to $0.9015. It has tumbled four cents in the past week.
Part of the Aussie's drop has also been because of a rise in the U.S. dollar, which has rallied in recent weeks as markets bring forward the risk of a rate hike by the Federal Reserve as data continues to suggest a sturdy U.S. recovery.
As a result, U.S. Treasury yields have risen, boosting the appeal of the greenback. Just last week, the benchmark 10-year yield posted its biggest weekly rise in over a year.
The Fed holds its next policy review on Sept. 16-17.
Sterling remained on the defensive before the Sept. 18 referendum on independence for Scotland, with polls showing the
``Yes'' and ``No'' camps pretty much neck-and-neck. A win for the ``Yes'' campaign could end the 307-year-old union with England and lead to the break-up of the United Kingdom.
The pound was softer at $1.6245 and remained vulnerable after last week's drop to a 10-month low of $1.6052.
—By Reuters