Denmark’s central bank governor pledged to face down speculators testing its currency peg to the euro, saying he would do “whatever it takes” to defend it.
Lars Rohde told the Financial Times that Nationalbank could “go on forever” defending the peg, after lowering interest rates four times in three weeks to a global record low of minus 0.75 per cent. It has also swelled its balance sheet to a record size by printing krone in an attempt to weaken the Danish currency.
“The main message is that we are ready to do whatever it takes to defend the peg. We have unlimited access to Danish krone and we have no restrictions on our balance sheet,” he said, in his first public comments since the recent quadruple rate cuts.
The FT article is here, here is Bloomberg coverage. I would bet against them, in any case this will be a neat test case for our judgments of Switzerland. The Danish government also has stopped selling bonds to help maintain the peg; Lord Polonius comments on that policy. The Danes have announced a true precommitment, in a way the Swiss never did, now let’s see what happens. Defense of the peg is in fact their only official monetary policy target, and the central bank head claims it is supported by all segments of Danish society.
Denmark, of course, has not yet joined the euro, or wanted to. Meanwhile, Crown Princess Mary of Denmark just turned forty-three.