20 Kroner – Denmark

In 2012, Denmark's currency situation was defined by its long-standing policy of maintaining a fixed exchange rate for the Danish krone (DKK) against the euro. This was managed through the European Exchange Rate Mechanism II (ERM II), with a central rate of 7.46038 kroner per euro and a very narrow fluctuation band of ±2.25%. The primary objective of the Danish central bank (Danmarks Nationalbank) was to ensure stability, not to target inflation or growth, making currency defense its paramount task. This policy was a cornerstone of Denmark's economic framework, providing predictability for trade and investment while the country remained outside the Eurozone following its 2000 referendum rejection of adopting the single currency.

The year 2012 presented significant challenges to this stability due to the escalating Eurozone debt crisis. As investors sought safe-haven currencies, substantial capital inflows put intense upward pressure on the krone, threatening to push it above its agreed-upon peg. In response, Danmarks Nationalbank took unprecedented and aggressive action throughout the year, implementing a series of interest rate cuts. By July, it had lowered its key certificate of deposit rate to a historic low of 0.20% and even introduced negative interest rates on certain deposits held by commercial banks, a rare move at the time. The goal was to deliberately make holding kroner less attractive, thereby weakening the currency and defending the peg.

These measures proved successful in maintaining the fixed exchange rate, but they came with consequences. The ultra-low and negative interest rates fueled a boom in the Danish housing market and increased household debt levels, raising concerns about financial stability. Furthermore, the policy effectively imported the European Central Bank's accommodative monetary stance, which was not necessarily tailored to Denmark's specific economic conditions. Thus, while 2012 stands as a testament to Denmark's unwavering commitment to its currency peg, it also highlighted the trade-offs and external vulnerabilities inherent in such a rigid exchange rate policy during a period of severe regional financial turmoil.