In the wake of Switzerland's surprise move to unpeg its franc from the euro, speculators have turned their sights on Denmark's currency peg, but the Danes aren't likely to follow the Swiss, analysts said.
"The risk of the Danish central bank capitulating and letting the krone appreciate is very remote," Andrew Kenningham, an economist at Capital Economics, said in a note last week.
Markets were caught off guard earlier this month when the Swiss National Bank (SNB) canceled its over three-year-old policy pegging the exchange rate of the euro buying 1.20 Swiss francs. The SNB had aimed to prevent a strong franc from causing deflation and hurting corporate earnings. The SNB also cut interest rates deeper into negative territory, by 50 basis points to negative 0.75 percent, in an effort to help cushion the blow.
Night and day
The SNB's move came amid expectations - since realized - that the European Central Bank (ECB) would introduce a quantitative easing program, which would further weaken the euro.
But unlike the SNB's relatively young peg, Denmark has tied its currency to neighbors' for over 30 years -- first to Germany's mark and later to the euro, Kenningham noted. The euro has been pegged to within a few percent of 7.46 krone to the euro.