Danish Krone General Info
The Danish krone contributes to a little less than 1% of foreign exchange market volume. It is the world’s twentieth most traded currency. The krone is subdivided into 100 øre.
Denmark is one of more than twenty nations and territories which currently pegs its currency to the euro. Denmark is the largest nation to do this.
Denmark is a member of the European Union but like the UK and Sweden, among other countries, it opted out of adopting the euro upon its introduction in 1999.
As part of the ERM II mechanism, the krone is restricted to moves of 2.25% above or below a fixed euro-krone exchange rate of 7.4604. In other words, the euro-krone rate can trade only between 7.2925 and 7.6282, and it is the role of Denmark’s central bank, Danmarks Nationalbanks, to ensure this happens.
Since 2004, the EUR/DKK rate has traded well within its allowed boundaries. Several times it ventured above 7.47, but no higher, and its most dramatic fall was only to 7.42.
Against the world's reserve currency, the US dollar, the krone was historically strongest in April 2008 when USD/DKK fell to just 4.66. The krone was at its weakest in February 1985 when USD/DKK reached 12.37.
DKK - Market View
The Danish krone is pegged to the euro (see General Info, above) and as such it shares the same general trading patterns and outlook as does the single currency.
In early August, the krone rally was still firmly intact.
In the first week of August, DKK/USD was trading at levels around $0.16, close to a two-and-a-half-year high, having been as low as $0.139 in January.
Against the British pound and Japanese yen, the krone also stood in early August at multi-month highs at £0.121 and ¥17.6 respectively.
The krone has rallied strongly since late April following Emmanuel Macron’s victory in the French presidential election and in light of speculation that the ECB will soon taper its bond buying program. ECB president Mario Draghi also boosted euro and krone sentiment in late June when he said that factors currently weighing on eurozone inflation were temporary in nature and the ECB would look through them when forming its future monetary policy.
For the rest of 2017, the krone will likely be driven by speculation surrounding ECB policy. Any move to scale back the bank's bond buying (akin to monetary policy tightening) would be supportive of higher krone exchange rates.