Danish central bank, Danmarks Nationalbank (DN) has published December’s FX reserves and central bank balance sheet, which shows that the FX reserve rose to DKK 468 billion in December from November’s DKK 464 billion. The increase in reserves was because of an unspecified FX purchases by DN of DKK 4 billion in December. The central bank did not intervene in the FX market. In December, government deposits reached DKK 135 billion in December, down from DKK 139 billion in November.
DN has been on the side-lines in the nine months as EUR/DKK has traded close to the 7.4400 level. It marks the longest period of no FX intervention since the start of 2014, when DN went 14 months without intervening in foreign exchange markets, noted Danske Bank.
“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.
Focus on European politics in the market for EUR/DKK might return this year, when Italy is set to hold elections, which might set off demand for DKK. Moreover, banks’ net position would possibly fall in the first quarter, which means slightly tighter DKK liquidity – another DKK positive. Hence, there is a risk to our forecast above that EUR/DKK would drop in the months and put an end to the FX intervention drought, stated Danske Bank.
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