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3 Jul 2015
Danish central bank continues to buy DKK, no easing expected before year-end – Nordea Markets
FXStreet (Barcelona) - Jan Størup Nielsen of Nordea Markets, notes that the Danish central bank has continued to buy DKK, purchasing 33.5bn in the FX space in June, and further expects the central to maintain rates on hold till year-end.
Key Quotes
“The figures for Denmark’s foreign currency reserves show that the Danish central bank bought DKK 33.5bn in the FX market in June. In total this implies that the central bank has purchased a little more than DKK 100bn over the past three months.”
“The relatively large scale intervention over the past three months has caused the foreign exchange reserves to fall to DKK 626bn. Despite the Danish FX reserve level is still around DKK 175bn above the level seen before the large-scale pressure for a stronger DKK at the beginning of 2015. On a longer-term perspective we expect the central bank to gradually reduce the FX reserves to a level of DKK 400-500bn, equivalent to around 25% of GDP.”
“In the current situation, we believe that the bank will give top priority to reducing the currency reserves, as this will both mop up excess liquidity in the money market and improve the central bank's room for manoeuvre in case of renewed strengthening pressure on the Danish krone. Based on this, we do not expect an independent Danish rate hike before year-end.”
Key Quotes
“The figures for Denmark’s foreign currency reserves show that the Danish central bank bought DKK 33.5bn in the FX market in June. In total this implies that the central bank has purchased a little more than DKK 100bn over the past three months.”
“The relatively large scale intervention over the past three months has caused the foreign exchange reserves to fall to DKK 626bn. Despite the Danish FX reserve level is still around DKK 175bn above the level seen before the large-scale pressure for a stronger DKK at the beginning of 2015. On a longer-term perspective we expect the central bank to gradually reduce the FX reserves to a level of DKK 400-500bn, equivalent to around 25% of GDP.”
“In the current situation, we believe that the bank will give top priority to reducing the currency reserves, as this will both mop up excess liquidity in the money market and improve the central bank's room for manoeuvre in case of renewed strengthening pressure on the Danish krone. Based on this, we do not expect an independent Danish rate hike before year-end.”