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Currencies
DANISH KRONE
Introduction | Overview | Structure | History | Factors affecting change in exchange rates | Daily trend of Danish krone | Weekly trend of Danish krone
Introduction


Krone forms the official currency of Denmark and is also used in Greenland and Faroe Islands. It is abbreviated as kr, DKR or as Dkr in daily use. According to the ISO 4217 regulations, the official currency code of the Danish krone is DKK and the numeric code for the currency is 208. Krone is called "kroner" in plural terms and has its subunit in the form of "øre". Krone was established with the coming up of Scandinavian Monetary Union in 1873.

Overview


The word krone has its meaning as "crown" in the English language. Denmark is one of the highly technological agriculture countries in Europe and as well as in the world. The country is has its balance of payment in positive and this fact shows that Denmark has a well-settled industry setup, most of them indulging in the food and energy sectors. The developed economy of Denmark enjoys a comparatively stable currency as it is closely pegged to the euro. The self-governing provinces of Faroe Islands and Greenland also make use of the Danish currency, Faroe Islands generally use the Danish krone coins and Greenland use the banknotes as well.

The government in Denmark in 1999 preserved the Danish krone by bargaining the "opt outs" in the Maastricht Treaty due to the attachment of the majority of population with the krone but the country is still committed to opt the euro in near future as it is the member of the European union. The import and export of all the currencies in the country is free though any amount exceeding 15000 euro has to be declared with the customs.

Structure

The structure of the currency of Denmark comprise of coinage in 7 denominations and banknotes in 5 denominations. "Øre" forms the subunit to the Danish krone and divides one unit of the currency into 100 equal parts. The 7 denominations of krone coins include coins with the face values 25 and 50 øre, 1, 2, 5, 10 and 20 kroner. This current coin series was introduced over a period of 5 years from 1989 to 1993. The coins differentiate from each other according to the color sequences they are categorized into. The smaller denomination coins i.e. 25 and 50 øre coins are made from copper colored bronze, coins of denominations 1,2 and 5 kroner coins are minted from silver colored cupro- nickel alloy and 10 and 20 kroner coins are minted using golden colored aluminium bronze. These 3 different sequences of coinage bear 3 different images on the obverse sides of the coins. The copper colored coins have the image of crown of King Christian V, the silver colored coins have the monogram of Queen Margrethe II and the gold colored coins have the portraits of her on the obverse. The silver coins possess a hole in the center of the coins and the gold coins have got the coat of arms of Denmark engraved on their backside.

The krone banknotes include the notes in 5 denominations that are 50, 100, 200, 500 and 1000 kroner. The front sides of the notes have got images of the portraits of important people in the history of Denmark and the backsides of the notes show symbolic images. The 50 kroner banknote is the smallest krone note in circulation and it has the portrait of Karen Blixen - famous writer. 100 kroner banknote is often called the principal note in the series, as it constitutes almost half of the notes in circulation in the country. The portrait on the 100 kroner note is of composer Carl Nielsen. An image of Johanne Luise Heiberg, actress, is depicted on the 200 kroner note and the 500 kroner note shows the image of the Nobel prize winner from Denmark, Neils Bohr. The obverse side of the 1000 kroner bank note bears a double portrait of artists Anna and Michael Ancher. The list below mentions the images that are shown on the backside of the banknotes

  • 50 kroner note - stone relief from Landet church

  • 100 kroner note - a basilisk

  • 200 kroner note - a lion

  • 500 kroner note - a dragon and a knight in armour

  • 1000 kroner note - a tournament scene from a sepulchral monument

The Danish coinage in the currency is minted and banknotes are printed by the Danmarks Nationalbank, the central bank of Denmark, which has the sole authority to manage the flow of currency in the country.

History


The currency system in Denmark came into existence in 1625 when rigsdaler was made the official currency of the country. It had 3 subunits to it namely mark, skilling and pfennig with a complex exchange among them i.e. 1 rigsdaler = 6 mark, 1 mark = 16 skilling, 1 skilling = 12 pfennig. This complex rate regime continued over a long period of time with some small corrections in the mean while. In 1873, Scandinavian Monetary Union was established constituting of two countries i.e. Sweden and Denmark. The purpose of this union was to revalue the currencies of the member countries to put them at par with each other and fixing them against gold. It was due to this monetary union that krone was introduced in Denmark and became the legal tender in the country. The currency got onto the gold standard with a fixed exchange rate of 2480 kroner = 1 kilogram of fine quality gold.

During the First World War, the gold rate of all the currencies was abandoned and krone too, was affected by it. The Scandinavian Monetary Union was dissolved and krone was brought down but it was decided that the name of their now separate currencies wont be changed. Denmark once again fixed its currency to the gold standard in 1924 but it had quit it permanently in 1931. Krone was pegged to the German reichsmark during the German occupation from the year 1940 to 1945 but after the Second World War was over it was pegged to the British pound and US dollar. When in 1999, the European common currency, euro was launched, most of the European countries opted in favor of the currency but Denmark moved out of the Maastricht treaty so that it could protect its own currency.

Factors affecting the exchange rates between two countries


The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

  • Flow of imports and exports between the countries
  • Flow of capital between the countries
  • Relative inflation rates
  • Fluctuation limits on exchange rate imposed by the governments of the countries
  • Merchandise trade balance
  • Rate of inflation in the country
  • Flow of funds between the countries for the payment of stock and bond purchases
  • Relative growth
  • Short term and long term interest rate differentials
  • Cost of borrowings
 
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