EUR/DKK: We expect Danish central bank to cap the downside - Danske

EUR/DKK: We expect Danish central bank to cap the downside - Danske

4 April 2016, 20:04
Vasilii Apostolidi
0
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According to analysts from Danske Bank, the Danish central bank did not intervene in the FX market in March and reserves may start to rise soon again. They expect Danmarks Nationalbank (DN) to cap EUR/DKK not far below current levels.


“Danmarks Nationalbank (DN) has just published March’s FX reserve and central bank balance sheet. In March, the FX reserve was DKK412bn and DN did not need to intervene in the FX market, asEUR/DKK traded close to the central rate. The FX reserve declined DKK10bn from February due to repayment of foreign government debt.” 

“Following a year of focus on DN selling EUR/DKK in intervention, the focus is now on whether we will see DN buying EUR/DKK in intervention to cap EUR/DKK downside following the fall over the past week to around 7.4440.”

We expect DN to cap EUR/DKK to do so not far below current levels. Further, we expect it to take DKK10-20bn in intervention to trigger a unilateral Danish rate cut. However, our main scenario remains for EUR/DKK to trade around current levels on 3-12M and for DN to keep the key policy rate unchanged at minus 0.65% on 12M.”

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