(Bloomberg) -- The Danish krone slipped after disappointing clinical results from national champion Novo Nordisk A/S sparked worries of a potential impact on the Nordic country’s economy.
The krone traded at 7.4614 versus the euro at 2:13 p.m. on Friday in Copenhagen, compared with 7.4592 ahead of the Novo data. It stayed within the band of 7.2925 to 7.6282 versus the common currency set out by the central bank to maintain the currency peg, and there were no signs of an intervention in the currency market, analysts said.
The dip came after data from Novo Nordisk showed patients using its experimental obesity shot CagriSema lost less weight than predicted in a study. Novo shares tanked as much as 29% after the news, their biggest drop on record, pulling Denmark’s benchmark OMXC25 index down more than 5%.
“The Novo Nordisk sell-off is contributing to lifting the euro against the Danish krone,” said Kristoffer Kjaer Lomholt, head of FX research at Danske Bank A/S. “The corporate sector flows including pharmaceutical companies have become increasingly important in recent years not least with the rise of Novo.”
Still, market volumes were thin ahead of the Christmas holiday, he said, adding that “we are by no means at a stage where intervention is in the picture.”
Denmark has found itself increasingly dependent on Novo in recent years, with the drug maker contributing about half of the country’s economic growth this year, according to Danske Bank. Meanwhile, unemployment in the Scandinavian country is close to a historic low, partly due to a hiring spree at Novo.
Read: Novo Nordisk’s Hiring Binge Leaves Danish Firms Starved of Labor
Novo’s success has been a key driver behind the strong krone, and one of the reasons the Danish benchmark interest rate is 0.4 percentage points lower than the European Central Bank’s, said Soren Kristensen, chief economist at Sydbank A/S.
In recent years, the market has started to permanently price in this interest-rate difference on expectations that Novo will continue to boost Denmark’s balance of payments, he said.
“And if you change that assumption, it’s only fair the krone falls,” he said. “It shows how dependent you have become on one company.”
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