Stronger dollar dampens the decline in Denmark’s IIP

Denmark's international investment position (IIP) was kr. 1,816 billion at the end of the first half of 2022, which is kr. 111 billion less than at the turn of the year.

IIP is Denmark's total assets abroad minus foreign ownership of assets in Denmark, also called liabilities. The value of both the assets and the liabilities fell in the first half of 2022.

Stock market losses led to fall

Falling stock market prices of the Danes' holdings of foreign shares and bonds contributed in isolation to reducing the value of the Danes' foreign assets and thus Denmark’s IIP. There were also losses on for-eign investors investments in Danish shares and bonds, and this led in isolation to an increase in for-eign assets. The increase in Denmark’s IIP from the fall in the price of Danish shares and bonds is not an expression for that the Danes have become richer, but rather that the value of foreign shares and bonds in Denmark has fallen. Overall, price changes on Danish and foreign financial assets led to a fall in Denmark’s IIP by kr. 346 billion.

Strengthening of the dollar led to increase

A large part of the Danes' investments in foreign assets are in dollars and the Danes have far more assets in dollars than they have liabilities, e.g. loans in dollars. A large part of the investments in dollars are currency hedged, and their value is not affected by fluctuations in the dollar exchange rate. However, part of the Danish foreign assets in dollars are not currency hedged. Here, a strengthening of the dol-lar against the krone of 9 per cent led in isolation to an increase in the IIP by kr. 177 billion.

Balance of payments surplus

In the slightly longer term, the development in the IIP follows the surplus on the current items of the balance of payments. The surplus on the balance of payments current account of kr. 123 billion increased the IIP correspondingly.