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STOCKHOLM: Unemployment in Sweden surprisingly increased in March, data showed on Thursday, causing the crown to weaken amid uncertainty about the basic strength of the labour market.

Driven by a large increase in the labour force, seasonally adjusted unemployment climbed to 6.7 percent from 6.2 percent in February, the statistics office said. Analysts polled by Reuters had on average forecast an unchanged rate.

SEB analyst Olle Holmgren said the unexpectedly high unemployment rate was likely to cause some confusion in the central bank with respect to both underlying unemployment trend and monetary policy.

"On the one hand, structural unemployment in Sweden is likely to be high and surveys indicate that the labour market is tight. (On the other), wage inflation is muted, putting this conclusion into question," he said in a note to clients.

The central bank held interest rates at -0.25 percent in February and said it aimed to raise them in the second half of the year. But doubts about the strength of economic growth and inflation could cause a rethink.

The bank publishes its next monetary policy decision on April 25, with markets expecting no change to the benchmark rate.

The crown traded as high as 10.50 to the euro after Thursday's news, against 10.44 just before. At 0900 GMT it traded at 10.48 crowns.

Unadjusted, unemployment rose to 7.1 percent from 6.6 percent against a mean forecast for unchanged. Total employment stood at 5.098 million people in March, up from 5.093 million in February.

Registered unemployment, published on Monday by the jobs agency, was 6.9 percent.

Copyright Reuters, 2019

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