ERM II (Exchange Rate Mechanism)

The Exchange Rate Mechanism (ERM II) aims to ensure exchange rate stability between the euro area and the EU Member States which have not introduced the single currency. Participation in ERM II is voluntary and Denmark is currently the only participant in ERM II. ERM II is a fixed exchange rate system in which each participating country´s currency is fixed at a central rate vis-à-vis the euro within a fluctuation band. Should a participating country´s exchange rate exceed the margins of the fluctuation band, the ECB and the ERM II member´s central bank are obliged to hold the exchange rate within the fluctuation band through foreign exchange market intervention. However, the intervention obligation may be suspended should this be in conflict with the ECB´s or the relevant central bank´s primary objective of price stability.