Articles from Monetary Review

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The pension sector as a foreign exchange market participant

Raffnsøe, Martin Dencker
Jensen, Jakob Roager
Larsen, Anders

Danish pension wealth has grown substantially in recent years, totalling approximately 175 per cent of GDP. Consequently, the companies' investment and risk hedging decisions have a considerable impact on the foreign exchange market. As a result of the regulation of pension companies and the credibility of Denmark's fixed exchange rate policy, pension companies' level of hedging of foreign exchange risks tends to be considerably smaller in euro than in other currencies such as dollars. Moreover, the hedging ratio in euro varies greatly across the companies. The article analyses the potential impact of the transition to market rate products on the pension companies' hedging of exchange rate risks. Companies with large shares of market rate products tend to rely less on hedging of exchange rate risk. This means that the total hedging ratio is expected to fall in step with the continued gradual transition to market rate products.


Regional aspects of the housing market

Hviid, Simon Juul
Hvolbøl, Tina Saaby
Pedersen, Erik Haller

The housing market has been picking up over the last three to four years. This development has been particularly pronounced in the Copenhagen housing market, which tends to set the course for the rest of Denmark. In this article, a demand relation is estimated for the Copenhagen market for owner-occupied flats, and the conclusion is that the price level i Copenhagen is high relative to incomes and interest rates. Hence, there is a considerable risk that continuation of the price increases of recent years may be followed by corresponding falls. The Copenhagen housing market is more vulnerable to sudden interest rate hikes than the rest of the country. The combination of high interest rate sensitivity and high house prices increases the risk that even a small rise in interest rates could trigger price falls.


Effects of Danmarks Nationalbank´s interventions in the foreign exchange market

Spange, Morten
Sørensen, Jonas

The article shows that Danmarks Nationalbank's interventions constitute an effective instrument to stabilise the exchange rate. This applies both in periods of calm in the foreign exchange market for Danish kroner and in periods of considerable pressure on the krone to either appreciate or depreciate against the euro. There are indications of a slightly greater impact on the exchange rate when Danmarks Nationalbank intervenes compared to when private agents trade kroner against foreign exchange. This may reflect that market participants see interventions as a sign of potential, imminent interest rate change.


Current Economic and Monetary Trends, 4th Quarter 2016

Danmarks Nationalbank

Current Economic and Monetary Trends, 4th Quarter 2016