Danish central bank to cap EUR/DKK in the range of 7.4440-7.4700: Danske Bank

Quotes from Danske Bank:

-In the Scandi FX market, EUR/DKK continued higher yesterday following the largest day-to-day change since the introduction of the euro in 1999 on Friday. EUR/DKK is testing the upper bound of the de facto trading band at 7.4684, which is the highest since 1999.

-We expect Danmarks Nationalbank (DN) to cap EUR/DKK upside below 7.4700 -a move above this level would, in our view, constitute a shift in the de facto management of the fixed exchange rate policy since 1999 and indicate that DN is allowing more symmetry in EUR/DKK around the central rate.

-Fundamentally, we remain concerned about EUR/DKK downside as Denmark holds an unsustainably high current account surplus above 6% of GDP and we still need to see the effect of ECB's bond buying starting in March.

-Any near-term pressure on the top side will in our view be countered by a drain in FX reserves. We expect DN to cap EUR/DKK in the range of 7.4440-7.4700 and we do not expect changes to the CD rate in 12M.