Nobel laureate Robert Mundell Thursday called for the Chinese Yuan to be included in the basket of the special drawing rights (SDR) regime of International Monetary Fund (IMF) this year.

He also said Yuan should not appreciate and a steady yuan is important for continued economic growth in Asia, as the soaring “Greenback” continues to have an impact on the region’s exports.

“The SDR basket should be reformed this year and I propose the Chinese Yuan to be included in the basket,” Mundell, Nobel Prize winner in economics and professor at Columbia University, said in a speech at the Chinese Academy of Governance.

The SDR is an international reserve asset created by the IMF. Four currencies, the USD, EUR, JPY and GBP respectively account for 44, 34, 11 and 11% of the value of the current SDR.

The basket’s composition is reviewed every 5 years to ensure it reflects the relative importance of currencies in the world’s trading and financial systems. The next review will take place late this year, according to the IMF website.

The SDR system would become useful only if the currencies in it were fixed, he added. Possibly the yuan could be added to the new basket in Y 2011, he said without estimating its possible weighting. Details need to be studied as the Yuan has yet to become a fully convertible currency, he said.

The Yuan’s exchange rate against the USD has been around 6.83 since Q-3 Y 2008. But since the USD has remained very strong recently as EUR tumbles, economists said the real rate of Yuan has also risen.

“The dollar is strong now, and there has already been some problem with Chinese exports, it might be more risky if the situation continues,” said Mundell. “Nobody wants China to devalue the Yuan, and China should not appreciate it, just keep where it is,” he said. “That’s a responsible policy for the Asia area.”

Referring to the sovereign debts crisis in Europe, Mundell, also “the Father of the Euro”, said the currency as the “counterpart of the Dollar” would go forward and the huge swings in the exchange rate of the Dollar had greatly aggravated global economic instability.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on May 14th, 2010and filed underBRIC, Equities, Latest News.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site