Danish krone drops most vs. euro since 2001

Jessica Morris
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The Danish Krone has had its biggest intra-day drop against the euro since 2001 (Source: Getty)

The Danish Krone had its biggest intra-day drop against the euro since 2001, amid reports that the central bank was ready to introduce capital controls, in a bid to stop the currency being used as a "safe-haven" for investors.

The Danish Crown has fallen 0.23 per cent to 7.4615 against the euro, having slumped to 7.4645 earlier today, which is a big move considering the pair usually trade in a 0-0.01 percent range because of the peg.

This drop followed reports that the head of Denmark's Economic Council said the country's central bank would defend its currency peg "to the last drop of blood."

"If it takes restrictions on free capital movement for a period to defend the fixed exchange rate, I assess that the central bank would be willing to go that far," Whitta-Jacobsen said.

Denmark has pegged its currency to the euro at a rate of about 4.46 since the single currency's launch in 1999. However, it's come under increasing pressure recently, with QE and the Greek debt crisis weakening the euro.

The country has already slashed its deposit rate four times this year, and its currently languishing at a record low of 0.75 per cent.

The policies are designed to stop the Danish krone becoming a safe haven currency for investors, because this would push up the currency's value, making it more difficult for the country's exporters to sell goods abroad.

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