Denmark's Central Bank Intervenes Again to Support Slumping Krone

Denmark's central bank intervened in the currency market for the second time this year to prop up the krone, buying a net 5.6 billion kroner in August. This move follows a smaller intervention of 0.7 billion kroner in June. The central bank maintains a fixed exchange-rate regime against the euro and keeps the currency within a 2.25% band centered on 7.46038 per euro.

The krone has been under pressure for years due to big public investment plans, record levels of overseas spending by Danish companies, and tensions with the US over Greenland earlier this year. The market pushed the exchange rate to 7.4761 per euro on Aug. 7, the softest level since the euro's introduction in 1999.

The policy rate stands at 1.85%, which is 40 basis points below the European Central Bank's rate. While analysts see no immediate hike as their base case, Danske Bank A/S's chief economist Las Olsen notes that an independent 0.1 percentage-point hike 'can't be ruled out' in the coming months.