RTRS: Danish central bank chief says crown's strength is normal
The Danish crown remains within its normal range even after a strong appreciation in recent weeks, central bank governor Lars Rohde told Reuters on Thursday, declining to comment on how the bank might stem further upward pressure.
The crown is currently at its strongest against the euro since early 2015.
"What is happening is a completely normal development," Rohde said on the sidelines of an annual meeting of the Danish Mortgage Banks' Federation. "This is within the normal range."
Speculators poured money into Danish assets in January and February last year, betting Denmark would drop its three-decade-old currency peg and let the crown rise, after the Swiss National Bank scrapped its cap on the franc against the euro.
Inflows of capital came from investors who compared Denmark with Switzerland and saw a chance of making a profit if the fixed exchange rate policy was abandoned and the crown subsequently appreciated, the central bank has said.
Some analysts expect the central bank to act soon if the pressure for a stronger crown continues.
"Pressure this time is not the same type of speculators. The strengthening is more likely due to spreads on money markets which have made it more attractive for investors to hold crowns," Nordea analyst Jan Storup Nielsen said.
The central bank's first step is likely to be intervention in the market by selling crowns for other currencies, which would increase Denmark's currency reserves. Some analysts also expect the central bank to cut the deposit rate further into negative territory to help depreciate the Danish currency.
Rohde declined to comment on which tool the central bank might use to stem the pressure on the crown.
The central bank kept its key certificate of deposit rate unchanged at -0.65 percent in March even after the European Central Bank, whose policy movements usually it tracks, cut its own deposit facility by 10 basis points to -0.40 percent.
Denmark slashed interest rates three times at the start of last year to keep the crown stable against the euro after Switzerland in January abandoned its franc cap. That meant that Danish rates were out of synch with the ECB's. (Reporting by Jacob Gronholt-Pedersen and Erik Matzen, writing by Ole Mikkelsen)
