Danish Central Bank Just Cut Rates For A Second Time This Week; Intervenes In Market To Preserve Peg

It was just on Monday when the Danish central bank, clearly panicking about the peg of the Danish Krone to the EUR, surprised the world when in an unexpected rate cut it went NIRPer, sending its deposit rate from -0.05% to 0.2%. Moments ago it doubled down with its second rate cut for the week, this time sending the rate from -0.20% to -0.35%. At this rate we should hit -0.5% next Tuesday and be well into the -1% territory two weeks from today. And not only that, but as Bloomberg observes, "The Danish central bank “also seems to have been intervening in the market prior to the ECB meeting,” Jes Asmussen, chief economist at Svenska Handelsbanken AB in Copenhagen." In other words, the Danish Krone's peg days are most likely numbered.

From Bloomberg:

Governor Lars Rohde delivered his second rate cut in less than a week today, lowering the deposit rate by 15 basis points to minus 0.35 percent. The move follows a 15 basis-point cut on Monday and comes as the European Central Bank unveils an historic bond-purchase program.

 

The Danish central bank “also seems to have been intervening in the market prior to the ECB meeting,” Jes Asmussen, chief economist at Svenska Handelsbanken AB in Copenhagen, said by phone. “Whether there’ll be further pressure for the krone to appreciate after the rate cut remains to be seen.”

And from the source:

Effective from 23 January 2015, Danmarks Nationalbank's interest rate on certificates of deposit is reduced by 0.15 percentage point. The lending rate, discount rate and the current account rate are unchanged.

 

The interest rate reduction follows Danmarks Nationalbank's purchase of foreign exchange in the market.

 

Danmarks Nationalbank's interest rates are:

 

Lending rate: 0.05 per cent

 

Certificate of deposit rate: -0.35 per cent

 

Current account rate: 0.00 per cent

 

Discount rate: 0.00 per cent

2015: the year currency wars got real.

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So far things aren't working out so well...