The Danish crown retreated from 2 1/2-year highs against the euro on Monday after Denmark’s central bank cut interest rates deeper into negative territory in a bid to limit further gains in the currency.
Denmark cut the deposit rate by 0.15 percentage points to -0.20 percent.
The crown fell to 7.4370 crowns per euro from a high of 7.4300 struck earlier in the day—its highest since mid-2012—as investors seeking safe-haven currencies switched from the Swiss franc in the wake of Switzerland’s move to abandon its currency cap and impose hefty negative rates.
Traders said some speculators are betting Denmark could be next to abandon its currency peg to the euro, given expectations for prolonged euro weakness if the European Central Bank opts for quantitative easing. Some analysts, however, said they expected the Danish peg to remain intact.
Denmark’s OMXC 20 share index hit a record high after the decision and was last trading 2.4 percent higher on the day.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.