Denmark's central bank moves to defend kroner's euro peg

Denmark's central bank moved to defend the kroner's peg against the euro in May by dumping about $3.5bn worth in a bid to weaken the local currency.

At 16:49 BST, the euro was up 0.01% to 7.4388 Danish kroner. It is presently trading around levels last seen in January 2015.

Danmarks Nationalbank raised its foreign exchange reserves by 23.4bn kroner to 426.9bn kroner in May, and about 23.6bn kroner of that represented direct interventions, it said in a statement.

The central bank's move comes as investors look for AAA-rated assets, and as European Central Bank today upwardly revised its inflation and economic forecasts for growth in 2016.

President Mario Draghi said the ECB expects the economy to grow 1.6% in 2016, compared to a March estimate of 1.4%. However, forecasts for the next two years were left unchanged at 1.7%.

Inflation is expected to rise 0.2% in 2016, 1.3% in 2017 and 1.7% in 2018. Draghi said the forecast for inflation this year was revised higher from the ECB’s last estimate of 0.1%, reflecting an improvement in oil prices.

The ECB is targeting inflation of just below 2%. Eurozone inflation fell an annualised 0.1% in May, compared to a 0.2% drop in April, Eurostat said on Tuesday.

Draghi warned that euro-zone inflation was likely to remain very low, or negative, for some time. He also said risks to the global economy were to the downside.

Meantime, sterling was up 0.3% at 9.6120 kroner as the UK prepares to vote later this month on whether to remain part of the European Union or not.

In recent sessions, investors have sold sterling following several polls this week that suggested a Brexit outcome might be on the cards, contrary to earlier ones that tended to favour a Bremain return.