Danske Research Team
Danske Bank A/S
The Danish FX reserve was roughly unchanged at DKK467bn in November.
EUR/DKK continued to trade above 7.46038 through most of the month, but it did not prompt FX intervention.
We forecast EUR/DKK at 7.4550 on 6-12M and the key policy rate to stay unchanged at minus 0.65% on 12M.
Danmarks Nationalbank (DN) has just published November's FX reserve data and central bank balance sheet. The FX reserve was roughly unchanged at DKK467bn as DN refrained from making FX intervention (see chart 1). Government deposits were DKK128bn down from DKK157bn in October.
EUR/DKK traded above the 7.46038 central rate through most of November and at a slightly higher level than the high from October (see chart 2). Nevertheless, DN remained on the sidelines. DN has not intervened in the FX market since March 2017, a run of twenty months.
Looking ahead, we expect EUR/DKK to make its way back below the central rate again on its own and forecast it around 7.4550 on 6-12M. Furthermore, we expect DN to keep the key policy rate unchanged at minus 0.65% on 12M.
Government deposits declined DKK29bn in November (see chart 3). That is mainly owing to the large redemption on DGB'18, which took place in November. The government plans to draw down its deposits by DKK55bn over the coming year to cover part of its financing need. A further decline in government deposits will increase banks' net position correspondingly.
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