Focus turns to DKK liquidity in Q1 18, when the risk is for another large pension return tax payment and thus somewhat tighter DKK liquidity.
Thus, we see downside risk to our base case for EUR/DKK of 7.4425 on 1-6M, particularly if European political uncertainty flares up ahead of the Italian election.
Danish pension funds with EUR assets that want to hedge this adverse scenario should use a potential uptick in EUR/DKK spot to around 7.4440 to hedge in shorter dated FX forwards.
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