...The peg is the authorities' primary policy anchor. Its over 30-year record against the Deutschmark/euro, and the authorities' policy and verbal responses show that the government-mandated peg is credible and unlikely to be abandoned, in contrast to the Swiss franc-euro floor, which was intended to be a temporary measure. But it is not yet clear how much of a deterrent it is proving to speculative capital inflows, and therefore what further actions the authorities might have to take. Danmarks Nationalbank cut its interest rate on certificates of deposit for the fourth time this year, to -0.75%, on 5 February. The central bank has also increased its purchases of foreign exchange in the market, and the Ministry of Finance has suspended bond issuance until further notice on the central bank's recommendation. The increasingly negative deposit rates, FX market interventions, and suspension of bond sales are responses to capital inflows following the decision in January by the Swiss National Bank...
