* Denmark cuts lending rate by 5 bps to curb the crown
* C.bank says very low euro money mkt rates strengthen crown
* Bank also trims CD rate and current account rate by 5 bps (Adds details, quotes, byline; updates crown rate)
By John Acher
COPENHAGEN, Jan 7 (Reuters) - Denmark's central bank trimmed its key lending interest rate by 5 basis points to a new all-time low of 1.15 percent on Thursday to ease strengthening pressure on the crown.
The cut narrowed the gap with the European Central Bank's key one percent refinancing rate to 15 basis points. Such a narrow spread has not been seen since a long period between 2003 and 2006.
"The interest rate reduction is a consequence of purchases of foreign exchange in the market," the Nationalbank said in a statement, using its regular formula for saying it had been intervening in the market to curb the crown.
The cut came two days after the bank reported its foreign exchange reserves climbed by 1.5 percent in December to 389.1 billion crowns ($74.96 billion) and that it had intervened in the market to buy foreign currency worth 7.9 billion crowns last month. [ID:nLDE60419Y]
"The money-market rates in euro are very low and the spread to the equivalent Danish rates tends to strengthen the Danish crown," said the bank which changes interest rates for the sole purpose of keeping the crown within a narrow band to the euro.
The rate reduction had been predicted by some analysts, though others had expected the bank to wait longer before easing monetary conditions again.
"The rate cut was to a high degree expected in the market after the latest build-up of foreign currency reserves in December," Handelsbanken Capital markets economist Rasmus Gudum-Sessingo said.
"Looking forward, one cannot rule out that there could be a need for further rate trimming as long as euro rates stay at the current ultra-low level," he said.
Gudum-Sessingo added foreign investors have found it attractive to get a rate pickup by holding Danish bonds, as seen during the big auctions of Danish mortgage bonds in December.
The Danish crown was little changed by the announcement. It softened briefly to 7.4413 to the euro
"The reduction is due to the fact that the bulging foreign exchange reserves are still growing due to strong forex inflow because it still is attractive to hold Danish crowns against the euro because of the short-term money market spreads," Danske Markets senior forex analyst John Hydeskov said. "Today's rate cut does not change much," Hydeskov said. "It is not expected that the inflow will stop completely as in the very short run it is still possible to earn a little by holding the Danish crown against the euro."
Hydeskov also said a further 5 bp cut could not be ruled out if the inflow of foreign currency persists.
But mortgage bank BRFkredit's senior economist Mikkel Hoegh said: "It is hardly likely that we will get lower rates this time around. So it is our expectation that the Nationalbank over the summer will begin to normalise key rates in the wake of corresponding action by the ECB."
The Danish central bank cut the lending rate nine times in 2009 for a total of 2.55 percentage points to curb the crown.
The bank also lowered its certificate of deposit rate on Thursday by 5 basis points to 0.90 percent and its current account rate by 5 bps to 0.80 percent.
(Additional reporting by Teis Jensen, Ole Mikkelsen and Henriette Jacobsen) (Reporting by John Acher; Editing by Toby Chopra and Chris Pizzey)