LONDON: The Danish crown fell to its weakest against the euro in 14 years on Wednesday, marking a victory for Denmark's central bank in its battle to defend the three-decade-old currency peg.
Speculators have been betting Denmark will abandon the peg and let the crown rise since the Swiss National Bank dropped the franc's cap against the euro on Jan. 15 and the European Central Bank announced its 1 trillion euro stimulus programme.
That compelled the Danish central bank to slash interest rates four times in January and February, and it has spent an estimated $40 billion since then intervening in markets.
"Those speculative flows are being unwound," said Richard Falkenhall, currency strategist at SEB. "It looks like the Danish central bank has been successful in defending the peg and the upward pressure on the crown is easing."
In robust volumes on the Thomson Reuters trading platform, the Danish crown fell to 7.4720 per euro early on Wednesday, its lowest against the euro since late 2000.
It was trading at 7.4704 per euro at 1100 GMT, with some traders saying Danish company dividend payments to foreign investors were causing the crown to weaken.
The crown had struck a 10-year high of 7.43 crowns per euro on Jan. 16, the day after the SNB removed its 1.20 per euro cap on the franc, triggering a 40 percent surge in the Swiss unit.
The steady drop seen over the last few days also meant the crown's first quarter losses were the worst in any quarter since the euro was introduced in 1999. The peg usually limits movements in the Danish currency to a tiny 0.01 percent per day.
Since January, the central bank has several times restated its commitment to arrangements under the Exchange Rate Mechanism (ERM II), which requires the crown to be kept within a range of 2.25 percent either side of 7.46038 crowns per euro. In practice, it has been kept within 0.5 percent.
In the pre-euro era, the crown was pegged to the German mark, starting in 1982.
With pressure on the currency ebbing, analysts said the central bank was unlikely to loosen monetary policy or intervene further. Denmark will publish currency reserve data on Tuesday.
"There won't be any rate cuts coming in the next few months," said Steen Bocian, chief economist at Danske Bank.
"But given the ECB's asset buying programme and other central banks like Sweden still cutting rates, we don't think they will unwind some of their measures."
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