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Danish Krone (DKK)

The legal tender of the Kingdom of Denmark

What is the Danish Krone (DKK)?

The Danish Krone is the legal tender of the Kingdom of Denmark – and also of the Faroe Islands and Greenland, two Danish territories. The krone is sometimes referred to by its translation into English – “crown.” It is subdivided into 100 øre, which are comparable to cents in most dollar-denominated currencies.

 

Danish Krone

 

The plural of krone is kroner, not krones. The symbol for the Danish krone is kr. The symbol ordinarily follows, rather than precedes, the stated monetary amount – thus, 50 kroner is expressed as 50kr rather than kr50.

The foreign exchange market designation for the krone is DKK. For example, in late 2020, the currency pair USD/DKK traded at 6.2246, which means that 6.22 kroner = 1 USD. The most widely traded Danish currency pair is the krone versus the euro – EUR/DKK.

 

Summary

  • The Danish krone is the legal tender of the Kingdom of Denmark – and also of the Faroe Islands and Greenland.
  • Coins have been produced in Denmark for more than 15 centuries.
  • Over the years, the krone has been variously pegged to gold, to the British pound, and currently, to the euro.

 

The History of Money in Denmark

The production and use of coins in Denmark go back many centuries. Organized coin minting was going on in Denmark as far back as the 10th century. The earliest official Danish coins were based on the Carolingian silver standard, a basis for silver currency that was created in France during the time of Charlemagne to replace the gold coinage of the Roman Empire. The silver-based monetary system of pennies, shillings, and pounds eventually served as the basis for Great Britain’s British pound sterling.

Unfortunately, Danish kings followed the practices of many other rulers, enriching themselves by periodically debasing their currency by reducing the actual amount of silver present in minted coins. It led to multiple remonetizations, creating new currencies to try to restore public trust in the nation’s money. One of such events was the creation of the current Danish krone in 1875.

The introduction of the krone came at a time when handling transactions with coins was becoming increasingly cumbersome. Therefore, a transition to greater use of printed banknotes accompanied the implementation of the new currency.

Denmark made multiple attempts to peg its currency to gold but eventually abandoned the effort in 1931, the same year that Great Britain dropped the gold standard. During Denmark’s occupation by Germany in World War II, the Danish krone was temporarily pegged to the German Reichsmark. In the immediate postwar world, it was pegged to the British pound.

The krone is currently pegged to the euro, in accord with the European Exchange Rate Mechanism (ERM) II, an exchange rate calculation tool designed to prevent excessive volatility in the euro’s exchange rate with trading partners in Europe. In recent decades, the Danish Kingdom considered joining the eurozone and adopting the euro as its official currency. However, the most recent public referendum, in 2000, rejected that notion by a small margin (53% to 47%).

The central bank of Denmark – the Dansmark Nationalbank – is the monetary authority that oversees the issuance of the country’s currency and exercises control over foreign exchange rates. However, in 2016, the bank made the decision to outsource the actual printing of Danish krone banknotes. The decision was, in part, spurred by decreasing demand for banknotes as fewer and fewer transactions involve physical cash transfers.

 

Danish Krone Coins and Banknotes

Danish coins currently consist of six denominations: a 50 øre coin (half a krone), 1kr, 2kr, 5kr, 10kr, and 20kr. Inflation has led to smaller value coins being eased out of production over the years, with the 25 øre coin ceasing to be legal tender as of 2008.

Danish coins, in order to make them more easily managed by visually impaired people, are distinguished in color, diameter, weight, and the texture of the coin rims. The color variations roughly correspond to the old system of gold and silver coins – thus, higher-value coins are composed of an aluminum bronze that approximates a gold color, while lower value coins minted from a nickel alloy appear silver.

Both the diameter and weight of coins increase with increasing value amounts. Finally, some coins have smooth edges, while others are textured, and the three middle-value coins – the 1kr, 2kr, and 5kr – have a hole drilled through their center.

The central bank has also issued various commemorative coins, notably including a 2005 series of five different 10kr coins with the theme of fairy tales written by the famous Danish author, Hans Christian Andersen.

Danish krone banknotes have been issued in several different thematic series since 1945, and all are still accepted as legal tender in Denmark. The current 2009 series, which features images of famous bridges in the country, incorporates updated security features, such as holograms and watermarks. Banknotes are printed in five denominations: 50kr, 100kr, 200kr, 500kr, and 1000kr.

 

More Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Devaluation
  • Eurozone
  • Foreign Exchange Risk
  • Swiss Franc (CHF)

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