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6 May 2015
Denmark intensified the FX intervention – Danske Bank
FXStreet (Edinburgh) - Jens Pedersen, Senior Analyst at Danske Bank, reviewed the recent FX intervention figures by the Danmarks Nationalbank (DN).
Key Quotes
“DN has just published April’s balance sheet. It showed that the FX reserve declined DKK32.4bn to DKK705.4bn – DKK33.9bn of the decline was due to DN selling FX in intervention. EUR/DKK traded above the central rate of 7.46038 for most of April, which has triggered DN intervention to support DKK”.
“DN’s intervention in the FX market in April indicates that the downward pressure on EUR/DKK has reversed and that DN is now reacting to cap EUR/DKK upside. Historically, FX intervention of this amount has triggered a unilateral rate hike from DN and, therefore, the market will keep a close eye on DN on Thursday for a possible rate announcement”.
“However, the current circumstances are not normal. DN allowed accumulated inflow into the FX reserve of above DKK100bn following its recent cut of the key policy rate to minus 0.75%. DN may want to shrink the FX reserve by a similar amount before raising its policy rates”.
Key Quotes
“DN has just published April’s balance sheet. It showed that the FX reserve declined DKK32.4bn to DKK705.4bn – DKK33.9bn of the decline was due to DN selling FX in intervention. EUR/DKK traded above the central rate of 7.46038 for most of April, which has triggered DN intervention to support DKK”.
“DN’s intervention in the FX market in April indicates that the downward pressure on EUR/DKK has reversed and that DN is now reacting to cap EUR/DKK upside. Historically, FX intervention of this amount has triggered a unilateral rate hike from DN and, therefore, the market will keep a close eye on DN on Thursday for a possible rate announcement”.
“However, the current circumstances are not normal. DN allowed accumulated inflow into the FX reserve of above DKK100bn following its recent cut of the key policy rate to minus 0.75%. DN may want to shrink the FX reserve by a similar amount before raising its policy rates”.