IMF increases weighting of dollar and yuan in SDR basket amid weakness



The IMF raised the weighting of the yuan to 12.28% from 10.92 in its first regular review of the SDR’s valuation since the Chinese currency was included in the basket in 2016, the People’s Bank of China announced on Sunday. China in a statement. The weighting of the US dollar fell from 41.73% to 43.38%, while those of the euro, the Japanese yen and the pound sterling decreased.

The PBOC and other regulators “will continue to resolutely push for the opening of China’s financial markets and further simplify the process for foreign investors to enter the Chinese market,” it said in the statement.

SDRs are an international reserve asset that can be converted into five currencies. The yuan’s entry into the SDR signaled that it became one of the world’s five reserve currencies in 2016, after years of efforts by Chinese authorities to promote its global use.

The change came amid a sharp depreciation of the yuan since late April, as it faces a double whammy of slowing domestic growth due to Covid-induced lockdowns and capital outflows due to its growing divergence in monetary policy with the United States. The PBOC set its benchmark rate for the yuan higher than expected for a ninth straight day on Friday, adding to its support for the currency.

In its statement on Sunday, the PBOC pledged to extend the time for interbank currency trading, make more types of assets available and improve information disclosure to provide better investment conditions for institutions. world.

The currency weighting ranking remains the same after the revision, according to an IMF statement on Saturday evening, with the yuan continuing to hold third place. The change will take effect on August 1 and the next review will take place in 2027.

IMF executive directors agreed that neither the pandemic nor fintech developments had so far had a major impact on the relative role of currencies in the SDR basket.

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