Jens Nærvig Pedersen
Danske Bank A/S
Denmark’s currency reserve was DKK438.3bn in April – DKK20.7bn lower than in March.
DKK20.1bn of the drop was due to net FX intervention from Danmarks Nationalbank (DN).
DN increased the rate on certificates of deposits by 15bp to 0.05% on 24 April, ending the regime of negative rates in Denmark.
DN has just released April’s currency reserve figures. The currency reserve declined by DKK20.7bn in April to DKK438.3bn. DKK20.1bn of the decline was due to net FX intervention by DN. On 24 April, DN increased the rate on certificates of deposits by 15bp to 0.05%.
The amount of intervention in April indicates that the unilateral rate increase was more or less business as usual for DN. Historically, DN has intervened around DKK10-20bn before making an independent rate change. That further means that the level of EUR/DKK in mid-April was uncomfortably high for DN, which then triggered the intervention and subsequent rate increase.
EUR/DKK now looks to have stabilised around 7.4640 and the negative carry on short EUR/DKK positions is now at the lowest it has been all year following last week’s rate hike. If governor Lars Rohde furthermore continues to follow a less activist line then DN will probably stay on hold in the coming year.
However, there is still a decent negative carry on short EUR/DKK positions and some room below the level EUR/DKK peaked at in late March. Hence, it cannot be ruled out that DKK will come under renewed pressure in coming months, which will require additional action from DN. We expect the ECB to remain on hold when the governing council meets next Thursday in which case DN will continue to be on hold as well.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.