DKK - Danish Krone

Overview of the Danish Krone (DKK)

The Danish Krone is the official currency of the Kingdom of Denmark and the autonomous territories of Greenland and the Faroe Islands. This currency was officially put into circulation on January 1, 1875. The currency is issued and managed by the National Bank of Denmark.

One krone is divided into 100 øre. Krone coins have been minted in Denmark since the 17th century. The Krone is pegged to the euro through the European Union's exchange rate mechanism, ERM II.

This currency plays an important role in pricing and payments in both domestic and international markets, is used in trade transactions, and can serve as a reserve currency.

History of the Danish Krone (DKK)

The Danish Krone has the oldest history, with the 1-øre coin minted between 825 - 840 AD. The modern krone was introduced as the main currency of Denmark in 1875, replacing the rigsdaler at an exchange rate of 2 kroner = 1 rigsdaler.

The Danish Krone has a quite long development history, specifically:

Early stage

Before the Krone was issued, Denmark used quite a variety of currencies, including silver coins and coins from neighboring countries. In the 17th century, the Danish state began issuing paper money.

 

The creation of Danish Krone

The Krone was officially introduced for the first time in 1873, when Denmark joined the Scandinavian Monetary Union along with Sweden and Norway. The name "Krone" in Danish means "crown," and this currency is divided into 100 øre.

Decline and recovery

This Nordic monetary union lasted until 1914 but gradually weakened due to economic fluctuations, especially during and after World War I. Therefore, Denmark decided to withdraw from the treaty in 1924 and reaffirm the nation's independence by issuing its own currency.

Financial crisis and restability

In the following decades, the Danish Krone experienced many fluctuations in value, especially during the global economic crisis. However, Denmark has implemented many measures to maintain the stability of this currency. 

The current state of the Danish Krone (DKK)

The Danish krone has special relations with several foreign currencies:

The link with the euro

Denmark joined the European Union (EU) in 1973 but rejected adopting the Euro through a referendum in 2000, with a majority of the population opposing the Euro. This means that the Krone remains Denmark's official currency.

However, the value of the Danish Krone is tightly pegged to the Euro at an exchange rate of 7.46038±2.25% in ERM II. Denmark maintains a fixed exchange rate system with the Euro through the "European Exchange Rate Mechanism II," aiming to stabilize the value of the Krone.

The link with The Faroe Islands and Greenland

The Faroe Islands are circulating a local version of the Danish Krone, not independently as the Faroese Krona, pegged to the Danish krone at par, using the Danish coin system but having its own banknote system, first issued in 1950 and later modernized in the 1970s and 2000s.

Greenland passed the Greenland Currency Act in 2006 with the aim of introducing distinct Greenlandic banknotes. This law officially came into effect on June 1, 2007. In 2010, the Greenland government announced that they wanted to introduce a separate Greenlandic banknote. However, at present, Greenland continues to use the Danish krone as its sole official currency.

The Faroe Islands and Greenland have their own IBAN codes (FO and GL, while Denmark has DK). Currency transfers between countries will incur international fees, in addition to EU regulations.

The Danish Krone (DKK) Denominations

In Denmark today, the Krone is still in circulation as both coins (metal money) and banknotes. Each type of currency will have the following denominations:

• Coins: The denominations of coins produced in Denmark include: 50 øre, 1 kr, 2 kr, 5 kr, 10 kr, and 20 kr.

• Banknotes: The banknotes in circulation in Denmark include: 50 kr, 100 kr, 200 kr, 500 kr, and 1,000 kr. 

On November 30, 2023, Denmark announced that banknotes issued before 2009 would no longer be legally accepted starting from May 31, 2025. The 1000 kroner note will also be phased out at the same time. The withdrawn banknotes will be accepted by the Danish National Bank until May 31, 2026.

The Danish Krone’s exchange rate

Currently, the DKK is applied at a fixed exchange rate, with the value of the Danish krone pegged to the Euro. This means that the DKK/EUR exchange rate is kept fixed within a very narrow fluctuation range. The National Bank of Denmark will be the responsible entity and will intervene in the foreign exchange market to maintain the stability of this exchange rate.

History of the Danish Krone exchange rate

At the end of the 18th century, the Krone was valued at 8 Danish Rigsdalers.

• In 1873, the Danish Krone was introduced, replacing the Rigsdaler and setting the exchange rate at 2 kroner = 1 rigsdaler.

• During World War I, the value of the Danish krone was pegged to the gold standard at a rate of 2,480 kroner = 1 kilogram of pure gold.

• In the period from 1940 to 1945, the Danish krone was pegged to the German Reichsmark.

• After 1945, the exchange rate of the Danish Krone was set at 24 Kroner = 1 British Pound.

• In 1949, Denmark devalued its currency against the British pound and the US dollar, pegging the rate at 6.91 Kroner = 1 US Dollar.

• In 1967, the DKK continued to devalue for the second time with an exchange rate of 7.5 kroner = 1 USD and 18 kroner = 1 GBP.

• Currently, the Danish Krone is pegged to the Euro (EUR) at a fixed exchange rate, with the rate fluctuating between EUR and DKK at 1 euro = 7.45 krone.

The Danish Krone has always been one of the most stable and trusted currencies in the Nordic region. This currency not only reflects Denmark's economic history but also symbolizes the country's independence and autonomy in monetary policy.