Danish FX reserves remain nearly unchanged in November, DN refrains from intervening in FX market

Danish central bank published the November’s FX reserve data and the central bank balance sheet today. The foreign exchange reserve was roughly the same at DKK 467 billion as the central bank did not intervene in the month. Government deposits came in at DKK 128 billion, falling from DKK 157 billion in October.

The EUR/DKK pair traded above the 7.46038 central rate through most of November and at a bit higher level than the high from October. However, the central bank continued to be on the sidelines. DN has note intervened in the FX market since March 2017, a run of 20 months.

“Looking ahead, we expect EUR/DKK to make its way back below the central rate again on its own and forecast it around 7.4550 on 6-12M. Furthermore, we expect DN to keep the key policy rate unchanged at minus 0.65% on 12M”, said Danske Bank in a research report.

Government deposits fell DKK 29 billion in November. This is mainly due to the large redemption of DGB’18, which took place in November. The government intends to draw down its deposits by DKK 55 billion in the coming year to cover part of its financing need. A further fall in government deposits will increase banks’ net position correspondingly, stated Danske Bank.