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.
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