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COPENHAGEN, Sept 2 (Reuters) - Denmark's foreign exchange reserves rose by a hefty 18.8 billion crowns in August to a new record 475.7 billion crowns ($91.0 billion) as the central bank sold crowns to weaken the Danish currency, the bank said on Friday.
The crown has recovered to levels seen before the bank's August rate cut after weakening only temporarily, so the central bank could cut rates again before long.
The reserves grew by 7.1 billion crowns as a result of net government borrowing abroad, the bank said.
"The interest rate reduction has had the sought-after effect that the rate spread between short Danish market rates and short market rates in the euro zone has narrowed," Nordea Markets senior analyst Troels Theill Eriksen said in a note to clients. "But on the other hand, the immediate weakening of the crown was temporary, and the crown is now roughly at the same level as before the rate reduction," Eriksen said.
"So the (strengthening) pressure on the crown is not over," Eriksen added, "and it is still on the cards that there could be a further rate reduction before long."
After the financial crisis, the central bank intentionally built up its forex reserves by taking loans and intervening, but the bank probably sees no need to build up the reserves further beyond the current record-high levels. For that reason, the bank would probably intervene only to a limited extent going forward before it would change rates, Eriksen said. "We believe that they will only intervene for 5-10 billion before another rate cut if necessary," he said. "Looking at today's figures with intervention of 11 billion, one could think that they had a target of around 10 billion and then cut."
Rather than kick out weaker members, strong countries like Germany should simply walk away from the single currency...
The trendy solution is to simply expel the weaker members of the Eurozone. That would work if Greece was the only problem, but it's not.
But understand this: If Europe's problems aren't resolved in an orderly fashion, the stock market drops we saw last month will be small potatoes compared to the steep declines that lie ahead.
So here's the solution: Let the Eurozone break up right now on its own terms. And let a new, stronger Euro currency come as a result.
•It would also allow the strong Euro countries to manage their own monetary policy. That would wipe out the inflation threat and ensure that domestic savers were adequately compensated. It also would eliminate any need for bailouts among these countries.
However, there are also benefits for the countries that stick with the Euro, which would presumably weaken.
Their inflation rates and interest rates would be higher, of course, as was the case for the Mediterranean countries before the Euro was invented. However, their debts would remain denominated in Euros, so they would not suffer the problems of the Asian countries that devalued in 1998 and increased their debt burdens and bankrupted the banks.
At this point, that is the only viable solution to the problems Europe faces.
What your saying is that if the currency become to strong, we have trouble exporting thereby losing revenue?
Countries will stop buying our goods because the currency is to strong?
If our currency grows too much couldn't we just print a few billion to devaluate and control it then buy some gold or energytechnology and other goods with the new money or use some of the foreign currency they "forced" them self to buy?.
As long as they dont print more money than needed to counter the foreign interest, shouln't we be able to control it and avoid a new hyperdeflation like what we saw in Germany many years ago?
Originally posted by Mimir
Resently speculations about the union's stability is growing and there has been suggestions that would make other unions. One of these suggestions talk about the stronger countries like GB, Germany and scandinavian countries should make their own union. In spite of the cut on interest rate and investing in currencies our reserves still grew.
Originally posted by Mimir
reply to posts by Bobbob and Rockpuck
Denmark voted against the Maastricht Treaty together with 52%. Later Denmark ratified Maastrick after they got 4 exceptions with the Edinburg Agreement. One of those exceptions was to keep our currency.
I guess some of the other monarchies got similar agreements, like the UK who still got their currency.
In Portugal, Germany and the UK the oppinion polls shoed lack of support in the public, Germany and Portugal never had a referendum vote.
Maastricht was later updated with the Amsterdam- and Nice treaty, strenghtening the union (empire).
Lichtenstein also a monarchy inside the Eurozone, but they are not even a part of the union. Makes you wonder if the monachies is the core of the "new" union for stronger economies in Europe inviting a few other strong economies like Germany inside.
edit on 5-9-2011 by Mimir because: (no reason given)