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Knuthsen: Why Denmark won't scrap its peg to the Euro

Ever since last week’s decision to scrap the Swiss franc ceiling against the Euro, there’s been talk of contagion. Top of the list is the Danish Krone. But are there really similarities? Saxo's Teis Knuthsen says there are large differences between Switzerland and Denmark in regard to the way they handle their currencies.

He says CHF is by tradition a free-floating currency and the decision to have an exchange rate ceiling in 2011 was only ever temporary. Denmark, meanwhile, has always had a long tradition of pegging DKK to EUR, going back to the 1980s. It's a policy that's backed by the Danish Parliament and Knuthsen says that to change it is a decision that cannot be taken by the central bank alone.

He also believes that the DKK/EUR currency peg is well managed, protecting it from a sustained attack on the Danish krone.

Looking ahead to Thursday's ECB meeting, Knuthsen says that if a broader QE package is adopted it would only have a 'marginal' impact on DKK. As EUR is being driven by a strong dollar, further weakening of the Euro could actually attract more interest in the Danish krone, he concludes.

03:16 minutes
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