UPDATE 1-Denmark holds interest rates after ECB cut

Fri Jun 6, 2014 3:49am EDT

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COPENHAGEN, June 6 (Reuters) - Denmark's central bank kept interest rates unchanged on Friday, a day after the European Central Bank cut its main interest rates.

The lending rate stayed at 0.20 percent and the certificates of deposit rate at 0.05 percent, the Nationalbank said in a statement. In making its decision, it said it had taken into account sales of foreign currency in the market since the beginning of April, the Danish crown exchange rate and developments in market interest rates.

The central bank, whose policy cornerstone is to keep the local currency steady within a narrow band against the euro, lifted its weekly certificates of deposit rate into positive territory on April 24 for the first time since mid-2012.

"The central bank has probably wanted to avoid a zig-zag course," wrote Sydbank chief economist Jacob Graven in a note to clients.

The Danish central bank used to shadow rate movements by the ECB but has changed rates independently a few times during the financial crisis in an effort to keep the crown stable.

Its July 2012 decision to take its certificate of deposit rate negative for the first time in the bank's nearly 200-year history is seen as having helped to achieve that.

The Danish crown had strengthened on Thursday after the ECB decision to 7.4617 and held at that level after the announcement Friday. The Danish central bank was closed on Thursday due to holiday in Denmark.

The bank intervenes in the market to keep the crown in a narrow band around its central parity of 7.46038 per euro. It changes rates when its interventions are not effective enough.

($1 = 5.4807 Danish crowns) (Reporting by Ole Mikkelsen; Editing by John Stonestreet)

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