Danish pension funds stop selling off Danish kroner - currency stabilizes

For a short period, the Danish pension funds increased the pressure on the krone so significantly that the central bank was forced to raise interest rates. The companies' risk hedging of Euro equities played a key role. Nordea Markets does not expect further rate increases, as the equity market has stabilized.

The central bank in Copenhagen | Photo: Jens Dresling/Ritzau Scanpix

The interest rate increase implemented by Denmark's central bank has put an end to the devaluation of the Danish krone compared to the Euro. On Monday, one euro equaled 7.4638 DKK, compared to 7.4735 DKK before the rate increase last week.

According to Nordea Markets global strategist Andreas Steno, currency risk hedging on the pension companies' Eurozone equity played a large role in the pressure on the krone, which led to a rate increase. The 0.15 percent increase apparently happened after a larger intervention.

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