COPENHAGEN --- Shortly after the turn of the year, the Danish Central Bank (Danmarks Nationalbank) began to hedge payments for the Danish Defense totalling 3.7 billion US dollars in connection with the purchase of 27 new fighter aircraft. The hedging is now completed.
"The process of entering into forwards which ensure a fixed price of dollars when the Government needs them has been smooth. The krone exchange rate has been on the strong side of the central parity throughout the period, and the krone has only seen marginal fluctuations," says Assistant Governor Frank Nielsen, Danmarks Nationalbank.
The Finance Committee of the Danish Parliament agreed in 2017 to purchase 27 new fighter aircraft from an American manufacturer. The delivery to the Danish Defense is expected in the years 2021 to 2026.
Most of the cost of the fighter aircraft, including simulators, payments for spare parts, support equipment, etc., will have to be paid in dollars.
To ensure the Danish Defense a high level of budget security, it was decided to hedge the expected payments in dollars so that the price in kroner is already fixed.
(EDITOR’S NOTE: An analyst for the Danish Central Bank declined to say how much the hedging cost, only saying that the operation was not very expensive because of the favorable interest difference between the US dollar and the Danish crown.)