Denmark cut its key interest rate unexpectedly on Monday ahead of the European Central Bank's policy meeting on Thursday.
The Nationalbank's lending rate and interest rate on certificates of deposit were reduced by 0.15 percentage point each. The lending rate was lowered to 0.05 percent from 0.2 percent and the deposit rate to -0.2 percent from -0.05 percent.
The discount rate and the current account rate are unchanged.
The central bank action came after the Swiss National Bank discontinued the currency ceiling of Swiss franc and lowered its interest rate to -0.75 percent.
The move from the Denmark central bank follows steady upward pressure on the krone and could heighten speculation that the Nationalbank will ultimately have to abandon its peg to the euro, Jessica Hinds, a European economist at Capital Economics said.
Indeed, the currency could come under more upward pressure once ECB quantitative easing is implemented and perhaps amid safe haven flows as an alternative to Switzerland, the economist noted.
The economist suspects that a further rate cut and additional foreign exchange intervention are to come in Denmark.
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