IMF Prepares for Inclusion of China’s RMB in its SDR Basket
The International Monetary Fund (IMF) Monday announced its board decision to amend the rounding methodology for determining currency accounts in the Special Drawing Right (SDR) basket, in order to make technical preparations for the inclusion of the Chinese currency, Renminbi (RMB Yuan), in the SDR Basket.
The amended methodology allows final currency amounts to produce currency weights that are very close to the weights adopted by the IMF, said the IMF, adding that it also makes the currency amount calculations easier to replicate for SDR users and market participants.
According to the IMF, currency amounts are the number of units of each currency in the SDR basket.
Currency amounts play a central role in the daily valuation of the SDR, as the value of the SDR is the sum of these amounts, valued at daily exchange rates of the currencies Vs the USD.
Currency amounts are determined on the last business day before a new SDR basket becomes effective and remain fixed over the SDR valuation period.
Last year, the IMF decided to include the RMB in the SDR Basket as a 5th currency, along with USD, the EUR, the JPY and the GBP, effective 1 October 2016.
Final currency amounts for the new valuation period will be determined and published on 30 September this year and will be fixed for 5 years.