Reference News Network, January 17 report. According to an article on the Spanish "Development" daily website on January 15, analysts believe that in the face of pressure from Trump, the Danish central bank has already intervened in the market to protect the Danish krone and its exchange rate relationship with the euro.
Currently, the market seems to be maintaining a calm observation towards the negotiations between the United States and Denmark regarding Greenland aimed at avoiding future conflicts. If the situation deteriorates, both the EU and NATO could be drawn into it.
There have even been some market speculation or obvious signs of a bubble. Although Trump threatened to annex this autonomous territory of Denmark, the stock price of the Greenland Bank, which dominates financial activities in Greenland, has risen nearly 30% on the Copenhagen Stock Exchange over the past month.
The market seems to have already priced in a possible agreement rather than a war. This agreement would promote military, mining, and transportation activities on this Arctic island, which could benefit the Greenland Bank, which is dominant in the region.
However, at the same time, the Danish krone is also facing certain market pressures. Analysts believe this could lead the Danish central bank to intervene to safeguard the stability of the currency's exchange rate.
Since 1999, the Danish krone has had a fixed exchange rate with the euro: 1 euro equals 7.46 Danish krone. Theoretically, the currency authorities allow the exchange rate to fluctuate up and down by 2.25%, but in practice, if the fluctuation exceeds 0.01 kroner, it will trigger market concerns.
Recently, the exchange rate of the Danish krone against the euro has remained stable at 7.472 kroner per euro. Olivier Kellerman, an analyst at Société Générale, said, "The exchange rate is approaching historical resistance levels of 7.47 and 7.48, where previous exchange rate fluctuations have always been blocked," in addition, the trading volume of one-year futures contracts with higher expected exchange rate fluctuations has surged, "although the market's expectation of Denmark breaking the fixed exchange rate system is minimal."
The market seems to be more concerned about the economic impact Denmark may face if Trump implements targeted tariffs, rather than major conflicts. In addition, the Danish central bank has sufficient foreign exchange reserves (110 billion US dollars, equivalent to 25% of its GDP), which are enough for intervention. Francesco Pescatore, an analyst at ING, said: "I tend to think that the Danish central bank has already started buying kroner this month, just like in 2019 and 2020."
However, if tensions escalate, the existing reserves may not be sufficient to support the stability of the Danish krone against the euro, and the market may experience severe turbulence. In such a case, it is not impossible for the European Central Bank to provide support to Denmark. Pescatore said, "Economic retaliation measures remain the main source of risk, of course, provided we rule out the black swan event of direct military conflict with the United States, as the impact would far exceed Denmark and the krona itself." (Translated by Wang Meng)
Original: toutiao.com/article/7596291501999522330/
Statement: This article represents the views of the author.