COPENHAGEN Jan 3 Denmark's central bank will
remain on high alert in 2017 to defend its safe-haven currency,
which is expected to face more upward pressure from booming U.S.
investments and political risks in Europe, the country's biggest
bank said on Tuesday.
The Danish crown, considered a hedge against
political uncertainty in the euro zone by many investors,
reached its strongest level against the euro since 2012 in
A large share of Danish pension savings are invested in U.S.
stocks, so the recent rally there has resulted in "substantial
wealth gains for Danish savers" and further strengthened the
foundation under the crown, Danske Bank A/S said in
a 2017 outlook note.
Upcoming elections in The Netherlands, France, Germany and
potentially also Italy, and the negotiations about Britain's
exit from the European Union, could also strengthen the crown
"We could see additional DKK (crown) buying if EU and euro
opposition gains further ground this year," Danske said.
A strengthening of the crown would in turn lead the central
bank to intervene by selling crowns for foreign currency.
Under Europe's Exchange Rate Mechanism (ERM2), a surrogate
for euro adoption, the crown is pegged within plus or minus 2.25
percent of a central rate of 7.46038 per euro.
In practice, Denmark's central bank has held it in a much
tighter range of 0.50 percent either way, via periodic currency
interventions and, more rarely, changing the certificate of
Danske said it expected the key rate to remain at the
current -0.65 percent throughout 2017.
The central bank will disclose its foreign exchange reserves
as of the end of December at 1500 GMT on Tuesday.
(Editing by Jacob Gronholt-Pedersen, editing by Larry King)