DKK (Danish Krone) and History

What Is the DKK (Danish Krone)?

DKK is the currency code in the foreign exchange (forex) market for the Danish krone. The krone is the official currency of Denmark as well as the provinces of Greenland and the Faroe Islands. The krone subdivides into 100 øre and is currently pegged to the euro. The local currency is denoted as "kr", as in kr100, meaning 100 kroner (plural).

Understanding the DKK (Danish Krone)

First introduced in 1619, the Danish krone was minted in honor of and by the Danish crown, as "crown" is the literal translation of krone. At this time, Denmark replaced the former Danish rigsdaler with the Danish krone as its official currency and tied the krone to the gold standard.

As modern international trade grew, the demand for a paper currency grew. Denmark created the second Danish krone as part of the dissolution of the country's participation in the Scandinavian Monetary Union with Sweden and Norway. The union dissolved in 1914, and the three participating countries chose to keep their currencies. The krone was pegged to the German Reichsmark mark briefly, then to the British pound, and later to the German Deutschmark.

DKK is currently pegged to the euro at 7.46 DKK per EUR and is allowed to fluctuate in a small band of +/- 2.25% against it. Between 2009 and 2019 the EUR/DKK rate has largely stayed between 7.45 and 7.47, well within the 2.25% threshold it is allowed to move.

Banknote denominations in circulation today include 50, 100, 200, 500, and 1,000 kroner. Coins include half-a-krone, one, two, five, 10, and 20 kroner.

Denmark and the Euro

Denmark first applied to be a member of the European Union’s (EU) predecessor community, the European Economic Community, in 1961 but did not join until 1973. Despite the long-term participation of Denmark in the European Community, the Danish people have earned a reputation for being relatively skeptical of the now European Union as the result of failed referendums related to increased integration into the European community. In 2000, the population voted not to replace the krone with the euro.

The first failed referendum took place in 1992 when Danish voters rejected a referendum on the Maastricht Treaty, one of the two treaties that form the constitutional basis for the European Union. After the failure of the 1992 referendum, amendments to the treaty satisfied some Danish concerns, and a second referendum ratified it in 1993.

But skepticism of the euro has lived on in Denmark, even after it joined the EU. On the 28th of September 2000, 53.2% Danish voters deciding again not to adopt the euro.

The Danish Krone in the International Economy

The Danish Krone is part of the European Exchange Rate Mechanism, aimed at reducing exchange rate volatility among EU nations. It pegs to the Euro at a ratio of 7.46 krone to one euro, and is required to stay within 2.25% of that level.

Despite Danish attachment to their currency, independent analyses have argued that Denmark is a de facto user of the euro since the National Bank of Denmark tracks European Central Bank policy so closely. Former Danish Prime Minister Anders Fogh Rasmussen has characterized this status as being a part of the eurozone without having a seat at the decision-making table.

According to World Bank data, Denmark experienced a 0.7% annual inflation rate and had gross domestic product (GDP) growth of a 2.85% in 2019. Denmark exports more than it imports, with major exports including machinery, chemicals, and pharmaceuticals.

Example of DKK in Forex Markets

If the rate is 7.4725, that means it costs kr7.4725 to buy one euro. To find out how many euros it takes to buy one krone, divide one by the EUR/DKK rate. This provides the DKK/EUR rate, which is 0.1338. That means it costs €0.1338 to buy one krone. These rates are useful if exchanging currency.

For example, converting €1,000 to kroner will mean the person gets kr7,4725 (7.4725 x 1,000). When converting cash (digital or physical) banks or currency exchange houses will typically charge a fee for the conversion. These can range between 1% and 5%. Therefore, the actual amount of currency recieved could be reduced by 3%, for example.

While DKK is pegged to the euro, it floats against other currencies. Therefore, it will experience greater volatility with currencies other than the euro. If the rate of the AUD/DKK, which is the Australian dollar versus the krone, is 4.47, that means it costs 4.47 kroner per Australian dollar. If the rate rises to 4.62, that means the krone has lost value, since it now costs 4.62 to buy one AUD. If the rate falls to 4.39, the krone has increased in value because it now costs fewer kroner to buy one AUD.