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Danmarks Nationalbank (DN) has just announced a new one-week lending facility with an interest rate of -0.50%. In the opinion of analysts at Danske Bank, it will allow DN to draw down the FX reserve further to cap EUR/DKK upside and, hence, reduce the possibility of a near-term rate hike.

Key quotes 

“We forecast EUR/DKK to continue to trade close to 7.4730 short term, as the current weak stock markets and low-interest rates in Denmark are weighing on the DKK.” 

“In the remainder of March, seasonal dividend payments will further support a high level for the EUR/DKK.”

“We still expect an independent 10bp rate hike from DN later this year, but see less probability of a hike in the short term should we see renewed outflow from the FX reserve.”

 

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