USD/DKK

For a less common exotic pairing that offers interesting profit potential, traders should consider the USD to DKK pair. Data from the Bank for International Settlements shows the Danish Krone (DKK) to be the 22nd most-traded world currency based on average daily trades (April 2019). In contrast, the US Dollar (USD) continues to be the pre-eminent option for global forex investors.

Denmark benefits from a close, yet unique relationship with the Eurozone. As a European Union (EU) member state, it negotiated an opt-out that means it is not obliged to adopt the Euro. However, the Krone is pegged to the Euro using the European Exchange Rate Mechanism ERM 2. The peg value of the currency is 7.46 kr to one Euro – although it can trade within a band of +/- 2.25%

Like other similar European currencies, traders can choose to capitalize on Denmark’s proximity to the Eurozone by trading the USD to DKK pair. Experienced investors can achieve healthy returns, while taking the opportunity to diversify portfolios or test out new strategies. Trading patterns can also be easier to identify due to lower volumes involved.

Due to the currency peg with the Euro, the value of the Krone is steered by the Eurozone. This means the USD to DKK rate is highly sensitive to any pressures on the Eurozone as a collective – or, indeed, any of the individual national economies within. For potential investors, it is worth noting announcements from the European Central Bank (ECB).

In terms of USD to DKK news, the same applies to Danmarks Nationalbank announcements. In reality, however, the Danish central bank typically mirrors ECB decision-making. It can even be argued that Denmark is already a de facto user of the Euro. But it is unable to influence factors that affect the USD to DKK rate as a result, which has led to political support for Euro adoption.

As of May 2018, Denmark meets the five criteria for Euro membership. But a lack of public and political support means there is currently no prospect of the country replacing DKK.

Denmark exports account for more than half of the national GDP, which traders must be aware of when trading the USD to DKK pair. It means that fluctuations in external demand for Danish goods/services will likely affect the value of the Krone. Germany, Sweden and the UK are main trading partners, but investors shouldn’t ignore the significance of US or Chinese demand.

For the US Dollar, its value can be positively or negatively affected in response to decisions by the Federal Reserve. Key US performance indicators to monitor if trading the USD to DKK pair include interest rates, GDP figures and employment data. The strength of currencies including the Euro or the stability of foreign Dollar reserves can also affect the USD to DKK rate.

OANDA’s USD to DKK chart displays the current value of one US Dollar against its equivalent value in Danish Krone. Traders can use this information to obtain the latest mid-market rates and inform future strategies. While the chart’s historic data can be used for this purpose, it offers no guarantee or prediction of the future performance of the USD to DKK pair.