Denmark: Longest period without intervention since advent of euro – Nordea Markets
|Jan Størup Nielsen, Research Analyst at Nordea Markets, points out that the recent data release from the Danish central bank shows that currency market intervention was not needed in June either, which marks the 15th straight month without intervention – the longest period since the advent of the euro.
Key Quotes
“The current long period of EUR/DKK stability followed some turbulent years that culminated at the beginning of 2015 when the central bank sold Danish kroner for a total of DKK 275bn to prevent the krone from strengthening too much versus the euro.”
“In this light, it is even more extraordinary that the bank after a relatively short time has managed to find the equilibrium level of the interest rate differential.”
“However, the long period without intervention could come to an end in the autumn when the different monetary policy approaches by the ECB and the Danish central bank will become more explicit.”
“Even if our assumption that the krone will weaken versus the euro proves correct, we do not expect the Danish central bank to sanction a rate hike before the ECB. If the anticipated krone weakening brings EUR/DKK above the central parity, the bank will probably initially resort to intervention to counter krone weakening.”
“In our view, it would take relatively considerable and extended upward EUR/DKK pressure for the central bank to consider an independent rate hike.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.