Denmark’s foreign exchange reserves have experienced a marginal decline in 2025, with reserves falling from 680.5 billion DKK in July to 678.6 billion DKK in August [2]. While this represents a slight contraction, the broader trend remains upward, with projections of 691 billion DKK in 2026 and 715 billion DKK in 2027 [3]. These reserves, managed by Danmarks Nationalbank, include gold, foreign currencies, and marketable securities, and are critical for maintaining the krone’s stability under the fixed exchange rate policy aligned with the European Central Bank (ECB) [1].
The krone’s stability is a cornerstone of Denmark’s economic strategy, particularly as a small open economy integrated into global markets. In 2025, Danmarks Nationalbank has maintained a neutral monetary policy, aligning interest rates with the ECB to cushion the krone against volatility [1]. However, the krone is projected to weaken gradually against the U.S. dollar, with an exchange rate of $0.13075 by year-end 2025, $0.12665 in 2026, and $0.12750 in 2027 [4]. This depreciation, driven by divergent monetary policies between the U.S. Federal Reserve and the ECB, could test investor confidence in Danish assets.
For foreign investors, the slight decline in forex reserves raises questions about systemic risks. Danmarks Nationalbank’s exposure to exchange rate fluctuations—particularly its euro-denominated assets—means a stronger krone could lead to capital losses [1]. Yet, the central bank’s robust reserves and hedging strategies provide a buffer, ensuring the krone remains resilient to short-term shocks. This stability, coupled with Denmark’s AAA credit rating from S&P Global and Morningstar DBRS [5], suggests that systemic risks remain low.
Investor positioning in Danish assets reveals a nuanced picture. The Danish stock market, with a P/E ratio of 14.97 as of September 2025 (below its 5-year average of 17.84), appears undervalued [6]. Earnings growth projections of 4.6% annually further support this view. Meanwhile, bond markets show narrowing yield differentials: the 10-year bond yield gap between Denmark and Germany is expected to reach 90 basis points by 2027 [7]. These dynamics suggest that Danish equities and bonds could offer attractive risk-adjusted returns, particularly for investors seeking diversification in a stable geopolitical environment.
Foreign direct investment (FDI) inflows, though volatile, remain a key driver. While net FDI fell by 4.15 billion DKK in Q2 2025 [8], the stock of FDI in Denmark reached 1,166 billion DKK by 2023 [9]. The government’s proactive “Invest in Denmark Strategy 2024–2027” aims to leverage the country’s strengths in digital innovation and green energy to attract capital [10]. This focus on high-growth sectors could mitigate risks from global trade tensions and position Denmark as a hub for future-oriented investments.
In conclusion, Denmark’s marginal forex reserve decline in 2025 is a short-term fluctuation within a broader upward trajectory. The krone’s stability, underpinned by ECB alignment and strong reserves, remains intact, while undervalued equities and narrowing bond yields present opportunities for risk-aware investors. However, the gradual depreciation of the krone against the USD and global trade uncertainties warrant cautious positioning. For those with a medium-term horizon, Denmark’s economic fundamentals and strategic reforms offer a compelling case for inclusion in diversified portfolios.
Source:
[1] Managing Danmarks Nationalbank’s financial risks, [https://www.nationalbanken.dk/en/what-we-do/stable-prices-monetary-policy-and-the-danish-economy/managing-danmarks-nationalbank-s-financial-risks]
[2] Denmark Foreign Exchange Reserves, [https://tradingeconomics.com/denmark/foreign-exchange-reserves]
[3] Denmark Foreign Exchange Reserves, [https://tradingeconomics.com/denmark/foreign-exchange-reserves]
[4] Danish krone to USD: Exchange Rate and Currency …, [https://www.xtransfer.com/knowledge-hub/67ac3320a94b91627e089523]
[5] Denmark ‘AAA/A-1+’ Ratings Affirmed; Outlook Stable, [https://disclosure.spglobal.com/en/regulatory/article/-/view/sourceId/13000241]
[6] Denmark Stock Market: current P/E Ratio, [https://worldperatio.com/area/denmark/]
[7] Nordic Outlook August 2025, [https://webapp.sebgroup.com/mb/mblib.nsf/dld/EF2EA3186B5E4B2AC1258CF100453AD1?opendocument]
[8] Denmark Foreign Direct Investment, [https://tradingeconomics.com/denmark/foreign-direct-investment]
[9] Direct investments – Statistics Denmark, [https://www.dst.dk/en/Statistik/emner/oekonomi/betalingsbalance-og-udenrigshandel/direkte-investeringer]
[10] Invest in Denmark Strategy 2024-2027 (English version), [https://investindk.com/for-danish-partners/invest-in-denmark-strategy-2024-2027-uk-version]
