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(Bloomberg) -- Denmark’s government dismissed speculation it could take similar steps to the Swiss National Bank and abandon its currency peg after the nation’s commercial banks were bombarded by calls from hedge funds.
The Danish currency peg “is secure,” Economy Minister Morten Oestergaard said in an e-mailed reply to questions.
Danske Bank A/S said Friday it had received several requests from offshore investors including hedge funds asking how Denmark is likely to respond to the SNB’s shock move after the krone appreciated to its strongest since mid-2012. SEB AB, Scandinavia’s biggest currency trader, said it had fielded similar calls. Both banks have sought to quash talk of Denmark abandoning its three-decades-old peg, arguing the Nordic country’s currency regime can’t be compared with the temporary framework created by the Swiss in 2011.
Denmark’s business community has also huddled around the euro peg, which is based on a bilateral agreement with the European Central Bank, arguing that to remove it would make no sense.
“There are always rumors in the market that have nothing to do with reality,” said Klaus Rasmussen, chief economist at the Confederation of Danish Industry. “We have invested a lot of time to get a credible regime” and to remove it “would be totally silly,” he said.
Karsten Biltoft, a spokesman at the central bank, declined to comment. The bank is likely to cut rates on Jan. 22, after the ECB delivers the details of its bond-purchase program, according to Danske and Nordea Bank AB.
Denmark’s krone is tied to the euro in a 2.25 percent band around a target of 7.46038. The central bank cut its benchmark deposit rate to minus 0.05 percent in September, compared with a low of minus 0.2 percent at the height of Europe’s debt crisis in July 2012. Its currency reserves are about 13 percent lower than their peak of 514.4 billion kroner ($80 billion) 2 1/2 years ago.
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