Denmark Cuts Deposit Rate Deeper Into Negative Territory

(RTTNews) - Denmark's central bank on Thursday cut its deposit rate by 15 basis points, taking it deeper into negative territory, apparently in an effort to thwart further appreciation of the krone after the European Central Bank announced massive stimulus plan earlier in the day.

The certificate of deposit rate was reduced by 0.15 percentage point to -0.35 percent, the Danmarks Nationalbank said in a statement. The lending rate remains at 0.05 percent.

It was the second reduction by the central bank this week.

Speculation of a full-blown QE programme from the ECB has been high and prompted the Swiss National Bank last week to abandon its CHF-EUR floor and take its deposit rate deeper into negative territory.

The surprise SNB move whipped up the markets after the Swiss franc surged more than 30 percent against the euro.

Subsequently, the Danish central bank also came under pressure and slashed interest rates on Monday to equal ECB's rates. The bank acted due to the steady upward pressure on the Danish krone amid the SNB move and specultaion of the ECB QE.

The Monday rate cut fueled speculation Denmark may also abandon the krone's peg to the euro that has been in place since the launch of the single currency. Previously, the krone was pegged to the Deutsche Mark.

However, Danish policymakers have asserted that they will preserve the krone-euro peg, saying they have other policy tools at their disposal to react to further upward pressure on the krone.