The Denmark exchange traded fund is bouncing back as the Danish central bank cut its main interest rates for the fourth time in two-and-a-half weeks in an attempt to keep pace with the runaway depreciation in the euro currency.
The iShares MSCI Denmark Capped ETF (BATS: EDEN) is up 1.2% year-to-date and is testing its short-term, 50-day simple moving average.
Denmark’s central bank cut its deposit rate to minus 0.75% from minus 0.5% to devalue its krone currency, which has been attracting Eurozone investors who are starved for yields after the European Central Bank enacted an aggressive bond-purchasing program, reports Charles Duxbury for the Wall Street Journal.
The Danish central bank is maintaining a euro exchange rate peg to stabilize inflation and support exporters.
The country’s central bank may be getting desperate after cutting rates in such quick successions. Typically, monetary policy makers would take time to assess the situation after each rate change since the overall outcome would not immediately become apparent.
For instance, Sweden’s central bank has not touched its main rates since 2001. However, with Eurozone neighbors trying to keep pace with ECB’s beggar-thy-neighbor policy, some believe Sweden’s Riskbank may consider rate cuts as early as next week, reports Anirban Nag for Reuters.
“The Riksbank should intervene and talk the crown down like the Swiss and the Danes. That will have a much bigger impact on the currency than quantitative easing or rate cuts,” Carl Hammer, chief currency strategist at SEB, said in the Reuters article.
Norway central bank has already enacted a buying plan to help offset the falling prices of its oil exports. The Norges Bank stated that it would sell foreign exchange equivalent to 700 million kroner a day, or $89.8 million in February, the Wall Street Journal reports.
Nevertheless, the Nordic markets have kept pace with Eurozone pressures as central banks react to the ECB. For instance, the Global X FTSE Nordic Region ETF (NYSEArca: GXF), which includes Sweden 50%, Denmark 24.3%, Finland 14.1% and Norway 10.9%, has increased 2.7% year-to-date while the iShares MSCI EMU ETF (NYSEArca: EZU), which tracks the European Monetary Union, rose 2.8%. [2015 Could Be a Good Year for Europe ETFs]
iShares MSCI Denmark Capped ETF
For more information on Denmark, visit our Denmark category.
Max Chen contributed to this article.