• Danmarks Nationalbank (DN) sold DKK17bn in FX intervention in March. It adds to the DKK0.4bn in February.
  • EUR/DKK trades close to the FX intervention level of c. 7.4360 to start April, so there is a good chance more intervention is to come.
  • If intervention continues in similar pace over the coming weeks, we expect DN to cut its policy rates 10bp. 

The Danish FX reserve rose to DKK447bn in March from DKK429bn in February after Danmarks Nationalbank (DN) stepped up FX intervention to keep EUR/DKK from falling below the 7.4360 low point. FX intervention was DKK17bn on top of the DKK0.4bn in February. The reversal of the monetary tightening from last year is ongoing. If FX intervention continues in similar pace over the coming weeks, we expect DN to cut its policy rates 10bp, i.e. the repo rate to -0.45% and the deposit rates to -0.60% - see Research Denmark - We look for a 10bp rate cut in 3M, 6 April, for more details. Before the release, we estimated the market put a 15-20% likelihood of a 10bp cut in 3M.

The central bank balance sheet data further showed the government's net financing was DKK-43.2bn in March. It was somewhat higher than the budget projection of DKK-54.4bn. We think it mostly owes to the timing of the pay out of saved vacation money, which came earlier than what the Finance Ministry initially expected. Government deposits rose to DKK194bn from DKK183bn. Hence, public finances continues to look strong and we still expect the Debt Management Office (DMO) to step up DGB buybacks later this year. Note though that the DMO kept foreign Commercial Paper issuance unchanged in March for a second month at a level of around DKK60bn. 

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