The Danish National Bank on Thursday cut its deposit rate by 15 basis points to negative 0.5% in an effort to prevent the krone from strengthening too much against the euro. It's the third time in less than two weeks the central bank has slashed its deposit rate, following persistent upward pressure on the krone's peg to the euro. The krone has been strengthening after the European Central Bank launched a quantitative-easing program and the Swiss National Bank ditched its euro cap. The Danish central bank said Thursday's rate cut came after making purchases in the foreign-exchange market. "By lowering the interest rate again, the central bank hopes investors will find it less attractive to hold Danish kroner," Steen Bocian, chief economist at Danske Bank, said in a note. "The rate cut emphasizes once again that the fixed-exchange rate policy will be defended. This defense will go on as long as necessary," he said. The Danish krone weakened against the euro after the announcement, so that the euro bought 7.4447 kroner, up from as low as 7.4342 earlier in the day. The OMC Copenhagen 20 index fell 0.2% to 813.80.
Copyright © 2015 MarketWatch, Inc.
Continue Reading Below