It appears the actions of the Swiss National Bank have prompted questions for all central banks as cash squirts away from the looming Euro crash (if France's Hollande is to be believed) to any and every other currency. As the Danish Krone rallied to its strongest in 10 years against the EUR in the last few days, worries over the currency breaking its peg have apparently prompted the Danish Central Bank into action:
- *DANISH CENTRAL BANK CUTS DEPOSIT RATE TO -0.2% FROM -0.05%
The immediate reaction was DKK weakness, but that has been completely unwound and follows worrying reassurances this week from Oestergaard that "Denmark's Krone peg to the Euro is secure."
As Bloomberg reports,
Denmark cut its deposit rate to defend the nation’s currency peg after the Swiss National Bank unexpectedly abandoned the franc’s cap to the euro last week.
The central bank in Copenhagen lowered its deposit rate to minus 0.2 percent from minus 0.05 percent, according to a statement today. The lending rate was cut to 0.05 percent from 0.2 percent.
The move comes amid speculation that Denmark could be forced to follow Switzerland, which had spent the last three years struggling to buy enough euros to support its exchange-rate regime. Denmark has maintained its currency peg for three decades. Its foreign reserves rose to 446.8 billion kroner ($69.9 billion) last month, compared with a high of 514.4 billion kroner in 2012.
EURDKK at near-10 year highs...
Well that didn't last long...
And one final reminder: Danish households debt 321% of disposable income - OECD
* * *
And you know they are in trouble when the denials start...
- *DANISH CENTRAL BANK SPOKESMAN BILTOFT COMMENTS VIA PHONE
- *DANISH PEG WAS AFFECTED BY SNB DECISION, BILTOFT SAYS
- *DENMARK HAS `NECESSARY TOOLS' TO MAINTAIN PEG, BILTOFT SAYS
- *DENMARK HAS NO PLANS TO DROP EURDKK PEG, BILTOFT SAYS
- *DENMARK CAN'T BE COMPARED WITH SWITZERLAND: BILTOFT
- *DENMARK HAD INTERVENED `FOR LITTLE WHILE' BEFORE CUTS: BILTOFT
Remember what the SNB said about "surprises"