Denmark raises deposit rate 10 bps to minus 0.65% - Corrected

    Denmark's central bank raised its deposit rate by 10 basis points (corrected from 100 points as in previous version of the story) to minus 0.65 percent, while it left its lending and discount rate unchanged, following sale of foreign exchange in the market.
    Danmarks Nationalbank had been expected to raise its deposit rate to limit further intervention after heavy purchases in December to limit the decline in the Danish krone against the euro.
    In addition to raising its deposit rate, the central bank lowered the current account limits of financial institutions to 32 billion Danish crowns from 63 billion.
    "The reduction of the current-account limits is a consequence of the monetary-policy counterparts' reduced need to place liquidity in Danmarks Nationalbank," the central bank said.
    The central bank adjusts the current account limits of banks, which allows them to hold certificates of deposits, to ensure that its interest rates can be transmitted to money market rates.
     On Dec. 3, the ECB cut its deposit rate by 10 basis points to minus 0.30 percent and extended its quantitative easing program by six months, leading to a rise in the euro's exchange rate as investors had expected even more easing.
    The Danish central bank, which was forced into a series of rate cuts in January 2015 following the Swiss National Bank's decision to scrap its cap on the franc's exchange rate, last cut the deposit rate by 25 basis points to minus 0.75 percent on Feb. 5, 2015 to stem an inflow of funds into Denmark.
    The main objective of Denmark's Nationalbank is to defend the exchange rate of the crown to the euro as a way to control inflation. It uses interest rates to make it more or less attractive to hold crowns and has a central exchange rate target of 7.46038 crowns to the euro, within a tolerance band of plus/minus 2.25 percent, or between 7.29252 to 7.62824.
     Since the ECB's move in December,  the Danish central bank has been intervening to keep the crown in its trading range and last month Denmark's foreign exchange reserves fell to 434 billion crowns following intervention of 50 billion crowns to support the crown.

Denmark cuts deposit rate again, vows to defend FX rate

    Denmark's central bank cut its deposit rate by another 25 basis points to minus 0.75 percent, the fourth cut in less than three weeks, and vowed to defend the fixed exchange rate of the Danish crown to the euro.
    "Danmarks Nationalbank has the necessary instruments to defend the fixed exchange rate policy for as long as its takes," the central bank's governor Lars Rohde said in a statement, adding "there is no upper limit to the size of the foreign exchange reserve."
    The central bank left the benchmark lending rate, the discount rate and the current account rate unchanged at 0.05 percent, 0.0 percent and 0.0 percent, respectively.
     Since the Swiss National Bank (SNB) on Jan. 15 surprised financial markets - and even other central bankers - and abandoned its Swiss franc peg to the euro, Denmark has seen a considerable inflow of foreign currency, pushing up the exchange rate of the crown.
     Denmark, which is a member of the European Union (EU) but the European Central Bank (ECB) and the single currency, has used a fixed exchange rate since 1982 to control inflation. Initially, the crown was fixed to the German mark due to the close trading relations with Germany and the Bundesbank's commitment to low inflation, and then from 1999 to the euro.
     The Nationalbank uses a combination of interest rates and intervention in currency markets to make it more or less attractive for investors and traders to hold Danish crowns. Its target is to keep the crown at a central rate of 7.46038 to the euro, within a tolerance band of plus/minus 2.25 percent, or in a rate of 7.29252 to 7.62824 euros.
    In the days following the Swiss move, the crown strengthened to around 7.43 but since then central bank intervention has helped push it back down, and today it was trading around 7.44 to the euro.
    In January alone, the central bank spent 106 billion crowns to hold down the crown, boosting its reserves to a record 564 billion.
    "There is no upper limit to the size of the foreign exchange reserve," Governor Rohde said, adding that the central bank's revenue is positively affected by the increase in foreign exchange reserves.

Denmark suspends bond issuance to limit FX inflow

    The Danish government has suspended the issuance of domestic and foreign bonds, saying this should help reduce interest rate spreads on longer-dated bonds and limit the inflow of foreign exchange, easing some of the upward pressure on the crown currency.
    The Danish central bank, which on Thursday cut its deposit rate for the third time in 10 days to make it less attractive for investors to hold crowns, said rate cuts and foreign exchange purchases had widened the negative spread between money market rates in Denmark and the euro area.
    However, the spread for government bonds had remained positive for longer maturity bonds.
    On Jan. 29 Danmarks Nationalbank cut its deposit rate by 15 basis points to minus 0.50 percent, following cuts on Jan. 22 and Jan. 19. The lending rate was cut on Jan. 19 to 0.05 percent.
    The main objective of Danmarks Nationalbank is to defend the exchange rate of the crown to the euro as a way to control inflation. It uses interest rates to make it more or less attractive to hold crowns and has a central exchange target of 7.46038 crowns to the euro, within a tolerance band of plus/minus 2.25 percent, or a rate of 7.29252 to 7.62824.
    The crown strengthened slightly to 7.444221 per euro from 7.44431 prior to the news.

    Danmarks Nationalbank issued the following statement:

Denmark cuts deposit rate another 15 bps to -0.50%

   Denmark's central bank continued its battle to reduce the attractiveness of holding Danish crowns, cutting its rate on certificates of deposit by a further 15 basis points to minus 0.50 percent, its third rate cut in less than two weeks.

   Danmarks Nationalbank said in a brief statement that the rate cut followed purchase of foreign  exchange in the market, indicating that it has been intervening in recent days to hold down the value of the crown against the euro.

    The Danish central bank left its lending rate at 0.05 percent - it was last cut by 15 basis points on Jan. 19 following the Swiss National Bank's (SNB) scrapping of its upper limit of the franc to the euro. It also left the discount rate and current account rates at zero percent.

    The SNB's surprise abandoning of its peg to the euro triggered speculation that Denmark would be next in line to alter its exchange rate policy, driving up the crown's exchange rate. During the week following the SNB's move on Jan. 15, Denmark sold almost $10 billion to hold down its crown.

    On Jan. 22 the Danish central bank again cut the deposit rate by 15 basis points to minus 0.35 percent, days after the central bank and the country's economy minister insisted that the policy of a fixed exchange rate to the depreciating euro would be maintained.

    The main objective of Danmarks Nationalbank since 1982 is to defend the exchange rate of the crown to the euro as a way to control inflation. It uses interest rates to make it more or less attractive to hold crowns and has a central exchange target of 7.46038 crowns to the euro, within a tolerance band of plus/minus 2.25 percent, or a rate of 7.29252 to 7.62824.

    Today the crown was quoted at 7.44255 to the euro.

    www.CentralBankNews.info

Denmark cuts lending, deposit rates by 15 bps

    Denmark's central bank cut its benchmark lending rate and its deposit rate by 15 basis points to ease the upward pressure on the exchange rate of its crown currency, a move that had been expected following Switzerland's scrapping of its peg to the euro.
   The rate cut reduces the Danish lending rate to 0.05 percent and the deposit rate to minus 0.20 percent. The current account rate and the discount rate remain unchanged at 0.0 percent.
    The main objective of Danmark's Nationalbank is to defend the exchange rate of the Danish krone to the single European currency as a way to control inflation. The Danish central bank has a target of keeping the crown at 7.46038 euros, within a tolerance band of plus/minus 2.25 percent.
    "The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market," the Danish central bank said.  In the last three months of 2014 the Danish central bank spent some 7 billion crowns to maintain the exchange rate to the sliding euro.
    Like the Swiss franc, the Danish crown enjoys a safe-haven status among many European investors and the central bank introduced a negative deposit rate of minus 0.20 percent in July 2012 in response to the sovereign debt crises when serious questions were being raised about the survival of the euro.
    But in April 2014 the central bank ended its experiment with negative deposit rates by raising the rate to 0.05 percent in response to growing optimism that the euro zone economy was improving.
    But in September 2014 the Nationalbank then again cut the deposit rate by 10 basis points to minus 0.05 percent following the ECB's cut in its policy rate to effectively zero and pushed its own deposit rate to minus 0.20 percent.
    The move by the Danish central bank comes ahead of Thursday's meeting by the ECB, which is expected to lead to full-scale quantitative easing with the purchase of government bonds.

Denmark raises rate 15 bps, ends period of negative rates

   Denmark's central bank raised its rate on certificates of deposits by 15 basis points to 0.05 percent, ending its experiment with negative rates since July 2012.

   Danmark's Nationalbank added that its other rates, the lending rate, the discount rate and the current account rate were unchanged at 0.20 percent, 0.0 percent and 0.0 percent, respectively.

    The rate rise follows the central bank's sale of foreign exchange to manage the krone's exchange rate to the euro. Unlike most central banks in advanced economies, the main objective of the Danish central bank is to defend the targeted rate of the krone to the euro of 7.46038 within a tolerance band of 2.25 percent on either side.

    "The short term rates in the euro area which are higher than the equivalent Danish rates have increased. This increase has tended to weaken the Danish krone," the central bank said.

    In addition, the central bank also reduced the current account ceiling of banks and other monetary counterparts to 38.5 billion crowns from 67.4 billion.

Denmark maintains rates as banks need to place funds

    Denmark's central bank maintained its key interest rates, despite a rate cut by the European Central Bank (ECB), saying commercial banks have "a large need to place funds" at the central bank.
    The National Bank of Denmark, which aims to keep its currency stable against the euro, normally shadows any ECB rate changes to maintain a rate spread to the euro and hold the crown currency within its fluctuation band of plus/minus 2.25 percent to a central rate of 7.46 crowns per euro.
    The Danish central bank entered unchartered territory in July 2012 when it cut its rates, including the deposit rate by 25 basis points to a negative 0.2 percent, in an attempt to weaken the crown which came under upward pressure as investor sought safe haven outside the euro area's sovereign debt crises.
     In January this year, the central bank then raised its rates after investors started to return to euro zone assets and the crown fell. Rates were raised by 10 basis points, leaving the deposit rate at a negative 0.10 percent and the key lending rate at 0.30 percent.

Denmark raises key rates as safe haven appeal wanes

    The Danish central bank, which aims to keep its currency stable against the euro, has raised its key interest rates following the sale of foreign exchange to support the krone, a sign that euro zone investors are no longer anxious to seek safe haven in the Scandinavian country.
    The benchmark lending rate, which was cut to a record low last July, was raised by 10 basis points to 0.30 percent and the rate on certificates of deposit was raised to minus 0.10 percent from minus 0.20 percent. 
    The National Bank of Denmark entered unchartered territory in July when it cut the rate on CDs to negative to weaken demand for the krone after jittery euro zone investors sought safe haven, pushing the krone above its peg and threatening to make Danish exports uncompetitive.
    In recent months, however, the krone has weakened as investors' optimism over the prospects for the euro zone has improved and the Danish central bank has been buying its own currency to support it.
    The central bank's board of governors do not hold scheduled meetings but normally adjust their rates in response to changes by the European Central Bank (ECB).
    The board left the discount and current account rates unchanged at zero percent.