EUR/DKK to stay supported by a large discount in FX forwards - Danske Bank

Felipe Erazo FXStreet

According to Danske Bank, EUR/DKK will continue to trade at elevated levels aided by a large discount in FX forwards and next year by the flow of vacation money.

Key quotes

"Danmarks Nationalbank (DN) has just published October's FX reserve data and central bank balance sheet data. In October, the FX reserve declined DKK2.3bn to DKK443bn. The decline was partly due to FX intervention. DN sold DKK0.4bn in FX reserves due to intervention."

"The DKK0.4bn in FX intervention marks the first time since January that DN has intervened in FX markets. EUR/DKK traded above 7.4700 and thus close to record-high levels during a large part of October, which prompted the action from DN."

"It could spur speculation about an independent DN policy rate hike. While that is justified, we think it still some time away as DN has ample room to draw down the FX reserve to manage the peg - we estimate about DKK40bn."

Author

Felipe Erazo

FXStreet

Born in Colombia, Felipe Erazo is the American Session Manager at FXStreet. He has been studying journalism with a degree in social communication at the Universidad de Chile.

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