By Dominic Chopping


Novo Nordisk's hugely popular weight-loss drugs are helping to keep interest rates in the country lower, according to Danske Bank director Jens Naervig Pedersen.

"We see a direct link between the growing role of the pharmaceutical industry in the Danish economy and upwards pressure on the currency and lower policy rate," he said in a note on Wednesday.

Denmark's currency is pegged to the euro so the central bank fine-tunes its monetary policy to that of the ECB through a combination of currency-market interventions and interest-rate adjustments to keep the krone stable against the euro.

Danmarks Nationalbank has already raised rates less than the ECB this year to weaken the export-driven strength in its currency, but the growing pharmaceutical industry may force it to widen the spread to the ECB's policy rate beyond the current 40 basis points over the medium term, Pedersen noted.

Surging demand for Novo Nordisk's drugs to treat obesity has sent the company's shares 73% higher this year and has turned it into Europe's second-most valuable company by market capitalization, behind luxury giant LVMH Moet Hennessy Louis Vuitton. If its popularity continues, which Pedersen believes the market is expecting, Danish exports will strengthen further, pushing the currency higher and forcing the central bank to keep interest rates lower.


Write to Dominic Chopping at dominic.chopping@wsj.com


(END) Dow Jones Newswires

08-16-23 1101ET