Danish Government Backs Euro Ties

Denmark is trying to silence currency speculators as the government and central bank insist the Nordic country won’t follow Switzerland in severing its euro ties.

“Circumstances significantly different from Denmark’s” were behind the Swiss National Bank’s decision, Danish Economy Minister Morten Oestergaard said in a phone interview. “Any comparison between Denmark and Switzerland is impossible.”

The comments followed yesterday’s surprise decision by the Danish central bank to cut its deposit rate by 15 basis points to minus 0.2 percent, matching a record low last seen during the darkest hours of Europe’s debt crisis in 2012. Like the Swiss, the Danes lowered rates after interventions in the market proved insufficient.

Denmark will probably deliver another rate cut on Jan. 22 as krone “appreciation pressure prevails” with the European Central Bank set to present details of its bond-purchase program, Danske Bank A/S reiterated today.

Danske, Denmark’s biggest bank, says it’s been inundated by calls from offshore investors and several hedge funds seeking advice on how to profit from the latest developments in currency markets. SEB AB, Scandinavia’s largest currency trader, says it’s fielded similar calls. Their response has been to tell investors that Denmark’s three-decades-old peg is backed by the ECB, unlike the SNB’s former currency regime.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza