* Denmark cuts CD rate by 10 bps to 0.6 pct
* Keeps main policy rate steady
* Says reduction is due to crown strength
* Also trims current account rate by 10 bps to 0.50 pct
(Adds details, quotes, byline)
By John Acher
COPENHAGEN, May 19 (Reuters) - Denmark's central bank cut its certificate of deposit rate by 10 basis points to 0.60 percent on Wednesday to curb the crown currency which has strengthened in the wake of the euro zone debt crisis.
The bank kept its main rate, the lending rate, steady at 1.05 percent, but it also trimmed its current account rate, another secondary rate, by 10 bps to 0.50 percent.
The bank changes interest rates for the sole purpose of keeping the crown within a narrow band to the euro, but big inflows of foreign currency into the crown have driven the crown up in recent months.
Nordea Markets senior analyst Jan Storup Nielsen said that the crown's strength was partly a safe-haven effect amid the turbulence on European financial markets.
"The strengthened crown has come because Denmark during the current debt crisis has got status as a safe haven on the financial markets because of the...limited deficit in the public sector, solid surplus in the current account and its relatively mild gross indebtedness," Nielsen said in a note to clients.
Denmark's foreign exchange reserves fell in April from a record high level in March, slipping for the first time since October, and the bank refrained from intervening in the forex market last month. But recent crown strength has forced the bank to intervene again, selling crowns for currency to soften it.
The crown was hardly moved by the rate cut, softening momentarily to 7.4409 to the euro
The rate cut followed a strengthening of the crown to close to 7.44 crowns to the euro and even a push through that level on Friday when Danish banks were closed.
LARGELY EXPECTED
EU-member but euro zone outsider Denmark runs a fixed-exchange-rate policy, which aims to keep the crown within a plus/minus 2.25 percent fluctuation band around a central rate of 7.46038 crowns to the euro. In practice the band is tighter.
It was the 17th cut in the Nationalbank's CD rate since it began cutting from a peak of 5.50 percent in November 2008, though it has held the lending rate steady since mid-January when it took the spread to the euro zone's official rate to a record narrow 5 basis points.
Economists had said earlier this week that the bank was likely to trim secondary rates again soon to ease the crown. [ID:nLDE64G12H]
Danske Markets senior forex analyst John Hydeskov, who had predicted a CD rate reduction would come on Thursday, said the bank probably chose to move on Wednesday to stem a further swelling of its foreign exchange reserves.
"Today's rate cut in no way needs to be the last," Hydeskov said in a note to clients. "It is still advantageous to hold crowns against the euro due to the interest rate pickup assuming that the European Central Bank keeps rates unchanged -- and that is the outlook for a long time yet."
Handelsbanken chief economist Jes Asmussen said: "I wouldn't rule out another CD rate cut."
"Another key lending rate cut is not in our main scenario but it's not impossible," he said. "7.44 crowns per euro seems to be the central bank's low acceptance point for the time being."
The rate reduction followed an announcement by Denmark's centre-right government earlier in the day that it aimed to save around $4 billion through new budget measures in 2011-2013 as part of an effort to restore fiscal balance. [ID:nLDE64I0JF] (Additional reporting by Anna Ringstrom and Ole Mikkelsen; Editing by Ron Askew/Toby Chopra)