ECB Sets Up 12B Euro Swap Line With Danish Central bank

The ECB has established a EUR 12 bln swaps line with the Danish central bank, in an effort to improve Danish money market conditions. The swaps agreement will remain in place as long as needed. The Danish central bank already has access to the Fed swap line, worth USD 15 bln. On Friday, the Danish central bank yet again hiked the policy rate in an effort to defend the Danish krone, raising its key lending rate by 50 bp to 5.50%. The Bank had hiked the policy rate by 40 bp on October 7 and did not mimic the ECB's 50 bp rate cut on October 8. Since the financial crisis intensified in mid-September, the Danish central bank lending rate spread to the ECB marginal rate has narrowed and turned negative, causing a outflow of foreign exchange. The central bank has intervened in the forex market in support of the DKK, but a further rate hike was deemed necessary.

Meanwhile, Euro and sterling extended their recoveries as profit taking picks up in to the N.Y. session. Cable briefly traded above the 1.5400 handle and EUR-USD extended to 1.2466 after it cleared away trailing stops above 1.2450. There are little significant flows to pin the move on, with reports of general interest from momentum funds and CTAs that got themselves short in to the European session. However, reports of reserve management activity increased at the lows and this deterred speculative accounts from further selling. EUR-USD recorded lows of 1.2335, which were its lowest levels for two and a half years, while Cable traded at 1.5280, but remained off its 1.5265 trend lows recorded on Friday.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.