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FX Strategy - Debt Strategy Confirms Danish Budget Will Be Big Deal For DKK

Published 12/14/2018, 07:43 AM
Updated 05/14/2017, 06:45 AM
  • The Danish debt management office plans to draw DKK48bn of the government's account next year to cover part of its DKK144bn borrowing requirement.
  • It will push DKK excess liquidity higher, keep short-term DKK rates and EUR/DKK FX forwards low and is likely to force Danmarks Nationalbank to sterilise part of the liquidity injection through FX intervention buying of DKK.
  • We expect DN to keep its policy rate unchanged until it mirrors a 20bp ECB hike 20bp in December 2019. We forecast EUR/DKK at 7.4550 in 6-12M, but stress that it could trade close to 7.4600 due to the higher net position.

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