The Danish krone is the official currency of the Kingdom of Denmark, Greenland and the Faroe Islands. The krone is regulated by the Danmarks Nationalbank, which is the nation's central bank, and it has the currency code of DKK and the symbol kr. While the code appears before the value, the symbol comes after it. The krone is divided into 100 ore.
The currency comes in the form of several banknotes and coins. At the time of report, the krone is pegged to the euro because of Denmark's participation in ERM II, an agreement established on Jan. 1, 1999 to manage the risks associated with currency fluctuations. Because of this agreement, the Danish currency is pegged at 7.46038 krone per euro and is allowed to fluctuate 2.25% higher or lower than this exchange rate.
The History Of The Danish Krone
The first Danish coins to be minted were created by King Harald "Bluetooth" Gormsson and referred to as the korsmønter or "cross coins." These coins were produced in the late 10th century.
Sweyn I Forkbeard (or Sweyn the Dane in English) was the next Danish monarch to mint coins. He inscribed the latin phrase "ZVEN REX DAENOR," which means "Sweyn, king of Danes," on these units of currency. Sweyn was the son of King Harald Bluetooth, and ruled as King of Denmark, England and portions of Norway.
Canute the Great implemented widespread minting in the 1020s. Several cities, including Roskilde, Hedeby, Slagelse and Ribe, were all locations where coins were minted. However, the city of Lund was the primary location for striking coins.
Canute the Great fostered stronger collaboration between England and Scandinavia, and as part of these efforts, he produced a series of coins carrying the same weight as those circulating in Denmark and other regions of Scandinavia.
Many monarchs followed over the next several centuries, creating coins that frequently featured a portrait in their likeness. The krone first appeared in 1618, during the reign of Christian IV, who ruled as King of Denmark and Norway from 1588 to 1648. The Danish government issued 0.25 krone, 0.5 krone and 1 krone coins in 1618, and it continued to mint krone-denominated coins in the 1620s.
Banknotes became a part of the Danish money supply in 1713, going into circulation when Denmark printed authorized notes to assist in trade. The Northern European nation faced a shortage of silver coins, as these units of currency had gone to foreign places amid the Great Northern War.
The Danish government printed roughly 120,000 authorized notes during a five-month period in 1713. While Denmark printed these units of currency with the idea that they would have the same value as silver coins, people holding notes were unable to exchange them for silver. As a result, the market value of the notes fell below their intrinsic value and the government took the notes out of circulation when the war was over.
While the responsibility of printing money initially rested with the king, this authority transferred to the newly formed private limited liability company Nationalbanken i Kjøbenhavn in 1818.
In January 1875, a new krone was introduced as the currency of Denmark. It was based off the gold standard, with 2,480 kroner being worth 1 kilogram of fine gold. This krone was also worth 0.5 rigsdaler.
The impetus for using the new krone was the Scandinavian Monetary Union (SMU), which was created in 1873. The SMU resulted in Sweden and Denmark joining forces in 1873, and Norway became part of this alliance two years later. During the rest of the 19th century, the use of banknotes pushed steadily higher as economic activity grew and market participants required a payment method less bulky than coins.
Gold Standard Abandoned
Up until 1914, the gold standard remained intact. However, this standard ceased to exist as a result of World War I being declared. The SMU also broke down in 1914. Denmark introduced the gold standard once again in 1927, but stopped tying its currency to gold in 1931.
When the Bretton Woods system was agreed to in 1944, representatives of 45 separate nations agreed to collaborative economic activity. Pursuant to this arrangement, the U.S. dollar was pegged to many different currencies, including the Danish krone. The Bretton Woods system was terminated in 1971.
Denmark's monetary policy is the responsibility of Danmarks Nationalbank, the nation's central bank. Danmarks Nationalbank uses monetary policy to maintain low inflation, which is one of its primary objectives, in addition to harnessing both interest rates and open market operations. The central bank also uses such policy to prove the krone with exchange rate stability.
Economy Of Denmark
Denmark, a net exporter of food and energy, benefits from a high-tech agricultural industry. They're also global leaders in the sectors of maritime shipping, pharmaceuticals and renewable energy. A major advocate of free trade, Denmark relies on the European Union for nearly all of its regulations and legislation. The nation is not a member of the eurozone and is therefore not obligated to use the currency.
Finanstilsynet, the Danish Financial Supervisory Authority (DFSA), is responsible for crafting and enforcing the legislation that governs Denmark's financial sector. DFSA supervises securities brokers, stock exchanges, authorized markets and money market brokers. It also supervises financial institutions such as pension funds, insurance companies, credit institutions and insurance brokers.
Major Krone Currency Pairs
Investors can trade the Danish Krone against several other currencies via currency pairs. More specifically, they can trade DKK/USD, DKK/GBP, DKK/EUR, DKK/JPY, DKK/INR, DKK/AUD, DKK/NZD, DKK/CAD and DKK/ZAR.
Banknote And Coin Issues
Substitution Series: During World War II, Germany tied its currency to the countries it occupied. As a result, the krone was pegged to the reichsmark between 1940 and 1945. On July 23, 1945, the substitution series was issued. This series was covert, in that it was printed without the knowledge of the German occupation forces. In addition, book printers Egmont H. Petersen provided their assistance with this printing.
On July 23, 1945, banknotes denominated in 5, 10, 100 and 500 krone were issued. The following day, a 50-krone banknote was released. Of the aforementioned notes, the 5- and 10-krone issues featured new designs. The substitution series bills only lasted for so long. Both the 5-and 10-krone notes were withdrawn on July 1, 1953, while the 50-krone issue has ceased to exist as part of the money supply since May 21, 1957. The 100- and 500-krone notes circulated longer, though they were withdrawn as of May 3, 1962 and April 2, 1964, respectively.
The Portrait And Landscape Series: The next batch of Danish banknotes, called the portrait and landscape series, was issued between 1952 and 1964. The first members of this issue were 5- and 10-krone banknotes, released October 14, 1952, while a 50-krone note followed roughly five years later on May 21, 1957. A separate 10-krone banknote, sporting a new format and color, was printed March 15, 1954. The first 10-krone note was in circulation for fewer than 4 years, being withdrawn since January 1, 1956.
The 1960s saw the release of the next two notes in the series, carrying values of 100 krone and 500 krone. These units of currency were issued May 3, 1962 and June 2, 1964. This decade witnessed the exit of another bill in this series, as the 5-krone note ceased to circulate February 14, 1962. During the 1970s, the remaining notes were withdrawn.
1970 Series: The next series of banknotes issued by the Danish government, known as the 1972 series, was printed between 1974 and 1995. The notes in this series feature the paintings of Danish artist Jens Juel on one side and animal motifs on the other.
The first banknote in this series, worth 500 krone, was issued April 18, 1974. The 100-krone note was released October 22, 1974, and three notes came out in 1975, with the 50-, 1,000- and 500-krone notes being issued January 21, March 11 and April 8, respectively. The 1980s saw the release of the 20-krone banknote on March 11, 1980, the same day the 10-krone issue became withdrawn. The remaining notes in this series all left circulation in the 1990s.
The 1997 Series: The most recent series of Danish banknotes, known as the 1997 series and containing 50-, 100-, 200-, 500- and 1,000-krone issues, was released between 1997 and 1999. The nation's central banks printed revised versions of these notes, containing flourescent colors and a hologram in order to improve security, between 2002 and 2005.
Banknotes And Coins
The Danish government has issued banknotes at many points, but only those printed after 1945 can be used as legal tender. Coins denominated in the currency count as legal tender if their value is at least 50 ore and they were minted after 1875. While 25-ore coins were usable in the past, they ceased to be legal tender on October 1, 2008.
The current coin series, which has values of 50 øre, 1 krone, 2 kroner, 5 kroner, 10 kroner and 20 kroner, was released by the Danmarks Nationalbank between 1989 and 1993. This series contains varying marks so users will be able to identify them easily. While a crown appears on the 50-ore coin, the monogram of the queen is featured on the 1-krone, 2-krone and 5-krone coins. A portrait of the Queen appears on 10- and 20-krone coins.
The central bank also prints commemorative and thematic coins from time to time. Commemorative coins feature notable events of the royal family, such as weddings, monarchs ascending to the throne and birthdays, while thematic coins display motifs such as fairy tales, towers and ships.
Danish Krone Around The World
The Danish krone is pegged to the euro as a result of Exchange rate mechanism II, a system that was introduced to help lower currency volatility in Europe. Any European Union wishing to be a part of the eurozone must participate in ERM II, a system of fixed interest rates.
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Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…