No DN intervention in FX market, Danish foreign exchange reserves unchanged in November

There was no intervention by the Danish central bank yet again in the month of November. Denmark’s foreign exchange reserve remained the same at DKK 464 billion in November, with the Danmarks Nationalbank making no FX intervention. Government deposits dropped to DKK 139 billion in November from October’s DKK 141 billion. November was the eighth consecutive month without any FX intervention, which emphasizes that it has been a quiet time for EUR/DKK since the French election, which urged some FX intervention selling of DKK at the start of the year, noted Danske Bank in a research report.

In November, the EUR/DKK pair traded close to the 7.4400 level. Moreover, this is the longest period of no intervention since the start of 2014, where DN went 14 months without intervening in the foreign exchange markets. EUR/DKK appears to be stuck in the 7.4340-7.4450 range, with the central bank prepared to intervene around the level of 7.4330-40.

“We forecast EUR/DKK to trade around 7.4425 on 1-6M and 7.4450 on 12M and for DN to keep the key policy rate, the rate of interest on certificates of deposit, unchanged at minus 0.65% on 12M”, added Danske Bank.

Next year, a focus on European politics might return in the market for EUR/DKK, with Italy ready to hold elections that might set off a demand for DKK. Moreover, banks’ net position might possibly fall in the first quarter of 2018, which signifies slightly tighter DKK liquidity. According to Danske Bank, the EUR/DKK might decline at the start of 2018 and put an end to the foreign exchange intervention drought.

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