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FAQ

Is ERM II a new character in Star Wars?

ERM II is the rather impenetrable abbreviation for the European exchange rate mechanism II, which is aimed at limiting the fluctuation of the participating currencies against the euro. Through this cooperation the participating currencies are closely pegged to the euro.

In ERM II the participating countries must stabilise their exchange rates relative to the euro. The cooperation means that a central rate is fixed for the participating countries relative to the euro. Around this central rate a fluctuation band is agreed which makes it possible for the participating currencies to move a little relative to the central rate.

Countries which are not participating in the euro can participate in ERM II on a voluntary basis. Currently Estonia, Latvia, Lithuania, Slovakia and Denmark participates in the EMR II. 

The standard fluctuation band in ERM II is +/-15%, but Denmark has entered into an agreement on a narrower band, so the Danish fluctuation band is +/-2.25%.

This means that the Danish central rate is DKK 746.038 per EUR 100, and the Danish fluctuation band is between DKK 762.824 and DKK 729. 252, which means that the upper and lower fluctuation limits are around DKK 7.63 and DKK 7.29 to the euro. If the exchange rate of the Danish krone moves towards one of the set fluctuation limits, the European Central Bank and Nationalbanken (the Danish central bank) are obliged to keep the rate within the fluctuation band. This is ensured through intervention in the form of support buying or selling of Danish kroner. In the event of acute speculative pressure against the Danish krone, the European Central Bank can provide support in the form of short-term credit in euro to supplement the Danish foreign exchange reserves.


Sidst opdateret: 24-07-2008  - ANSJ