EUR/DKK: Watch Out For The 'March Dividend Effect'
Danske Markets | Mar 03, 2015 07:44AM ET
Following a bounce above the central rate, EUR/DKK dropped yesterday to 7.4530, indicating that the DKK appreciation pressure has not passed.
In March, Danish companies pay dividends to investors, including foreign investors, a factor that normally weighs significantly on the current account balance - a net effect of around DKK3-9bn.
This may add temporary support to EUR/DKK as the ECB gets ready to start ramping up its bond purchase programme - a factor that will likely weigh on EUR/DKK.
We expect EUR/DKK to be stuck in the range of 7.4440-7.4700 and do not expect changes to the CD rate, which is currently at minus 0.75% on 12M. Danish real-money funds with EUR exposure and a hedging mandate should hedge EUR exposure due to prevailing downside risk to EUR/DKK spot and FX forwards.
Watch Out For The 'March Dividend Effect
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