Denmark spends $25 billion in February to keep peg, reserves hit new high

Denmark's foreign exchange reserves hit a fresh all-time high after the central bank spent 168.7 billion Danish crowns ($25 billion) on intervention to defend the national currency's peg to the euro, the central bank said on Tuesday. The reserves stood at 737.1 billion crowns at the end of February, up from 564.1 billion at the end of January. Analysts had expected reserves to build to 730 billion crowns.
The central bank has been selling crowns in the foreign exchange market to help weaken the currency, which has been straining against the upper end of a tight range to the euro. By buying foreign currency, it has boosted reserves by 65 percent since the start of the year. Denmark, a European Union member but euro zone outsider, keeps the crown within a 1 percent range around a central parity rate of 7.46038 crowns per euro, although under ERM-II exchange rate rules it is allowed a wider 4.5 percent band. The crown hit highs of 7.43 to the euro in mid-January after the Swiss central bank unexpectedly removed the franc's cap against the single currency, prompting speculation that Denmark would follow suit. It then fell on February 20 following comments by a government adviser that the central bank would go to extremes to defend the long-held policy, including capital controls if needed.