The Swedish crown sank 1 percent on Thursday after the central bank in Stockholm surprised markets by cutting interest rates and saying it would pump more money into the economy, citing risks from Greece.
With investors gearing up for a flurry of US data, the dollar hit a three-week high against a basket of major currencies at 96.406 ahead of nonfarm payrolls numbers, which could firm up expectations of a Federal Reserve interest rate hike later this year.
Sweden's Riksbank said that uncertainty abroad had increased and it was difficult to assess how events in Greece might develop. It also flagged the threat from a strong Swedish crown to inflation, as it cut its key interest rate to -0.35 percent.
"For the market it's quite a big surprise because there was to a certain extent the notion that the Riksbank may have reached the lower bound in rates," said Manuel Oliveri, FX strategist at Credit Agricole in London.
"They're obviously very strongly focused on bringing inflation to target, and this is a message to the market that ... they will very much remain focused on keeping any upside to the Swedish crown very limited in order to not risk inflation falling further."
A large majority of analysts in a Reuters poll had forecast the bank would keep its already ultra-loose policy unchanged after the latest inflation figures gave it some breathing room in its fight to fend off the threat of deflation.
The crown hit a three-week low against the euro following the Riksbank's announcement, falling 1 percent to 9.3700 crowns before recovering a touch to 9.3462, still down 0.9 percent on the day.
With US markets closed on Friday for the July 4 Independence Day holiday, the closely watched payrolls will come a day earlier than usual at 1230 GMT, along with durable goods at 1400 GMT among other numbers.
"This payrolls release is going to be the most decisive release we've had for some time - we think the Fed is going to hike in September," said Sam Lynton-Brown, a currency strategist at BNP Paribas in London.
"If we get the upside surprise that we're expecting - we're forecasting 250,000 - then we think there could be a significant adjustment in US front end rates, and ... there's a lot of potential for dollar upside."
The euro was 0.2 percent up against the dollar at $1.1071.
Greek Prime Minister Alexis Tsipras on Wednesday urged Greeks to reject an international bailout deal, souring hopes of any breakthrough as markets looked ahead to Sunday's referendum that might decide Greece's future in the euro zone.
Lynton-Brown added that, with it clear that the referendum would go ahead, and with euro zone finance ministers adamant that no further discussions would be held until after the vote, the euro was unlikely to move much on Greek news before Sunday.
The New Zealand dollar skidded below 67 US cents for the first time in five years as a slide in dairy prices narrowed the odds on more rate cuts. It traded down 0.9 percent at $0.6670.
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