Central Bank of Denmark took a large-scale move against the weakening of the krone

Denmark’s foreign exchange reserves fell by more than 9 billion DKK (1.3 billion USD) in January after the country’s central bank made its largest intervention in the foreign exchange market in the last four years to prevent further weakening of the currency against the Euro.

Danish foreign exchange reserves dropped to 426.3 billion DKK (63.0 billion USD) in January from 435.4 billion DKK at the end of December, the central bank said.

In January, central bankers decided to withdraw 12.1 billion DKK from the market in order to prevent further weakening of the currency against the euro to which it is attached. This was the fourth consecutive month of interventions and the highest currency purchase since December 2015. After the board of the Central Bank of Denmark lowered its basic institutional interest rate in September, reflecting the ECB’s fall in interest rates, the value of the crown has steadily declined to levels not observed since 2015.

“Despite the acceleration of monthly purchases, we see this as a prelude to an independent increase in Danish interest rates,” said Nordea analyst, Jan Storup Nielsen.

In 2015, the Danish central bank launched an initiative to discourage foreign investors by buying crowns in the hope that Denmark would abandon its fixed rate against the euro.