COPENHAGEN (Reuters) – Denmark’s foreign exchange reserves fell by more than 9 billion crowns ($1.3 billion) in January after the central bank made its largest intervention in the currency market in four years to prevent a further weakening of the currency against the euro.
Denmark’s foreign exchange reserves fell to 426.3 billion crowns ($63.0 billion) in January from 435.4 billion crowns at the end of December, the central bank said.
It bought 12.1 billion crowns in January to prevent the currency from weakening further against the euro, to which it is pegged. That was the fourth consecutive month of interventions and the highest purchase since December 2015.
Since the central bank cut its key rate to its lowest level ever in September, mirroring a cut by the ECB, the crown has steadily weakened to levels not seen since 2015.
“Despite the acceleration in the monthly purchases we do see this as the prelude to an independent Danish rate hike,” Nordea analyst Jan Storup Nielsen said in a note.
The currency was trading at 7.4726 crowns against the euro, around the level it has traded since the beginning of the year.
In 2015, the Danish central bank intervened heavily to stave off foreign investors buying crowns in the hopes that Denmark would abandon its fixed peg to the euro.
(Reporting by Jacob Gronholt-Pedersen; Editing by Gareth Jones and Philippa Fletcher)