International Monetary Fund includes Yuan in reserve currency basket

  • International Monetary Fund includes Yuan in reserve currency basket

International Monetary Fund includes Yuan in reserve currency basket

The dollar now accounts for 41.9 percent of the SDR, the euro for 37.4 percent, the British pound 11.3 percent and the yen 9.4 percent, reports Bloomberg.

The IMF executive board confirmed the renminbi's inclusion in its SDR basket yesterday, following a recommendation by IMF managing director Christine Lagarde to incorporate it as a fifth currency last month.

By mid-morning in Hong Kong on December 1, the official yuan exchange rate (CNY=) was unchanged against the USA dollar at 6.3982.

Meanwhile, Nigeria's external reserves depreciated by $238 million in November to $30.012 billion as at November 27, 2015, compared with the $30.250 billion it was as at November 2.

These reform efforts will improve the finance systems, and will ultimately improve the growth and stability of China's economy as well the global economy.

Although the renminbi's inclusion will be viewed as recognition of the strides that the Chinese authorities have made to reform and open up its economy, GaveKal says that the move is "largely symbolic" and challenges remain ahead for the currency.

The Washington-based institution on Monday welcomed the yuan into its elite reserve currency basket known as "Special Drawing Rights", recognising the ascendance of the Asian power, already the world's second largest economy.

The IMF said the yuan's inclusion will make the SDR more diverse and representative of the worldwide community.

China asked a year ago for the yuan to be added to the Fund's Special Drawing Rights list.

Some analysts argue that including the yuan in the SDR basket will prompt central banks and private investors around the world to increase their yuan-denominated holdings.

"The market now uses a market average for the won-to-dollar exchange, and the cross rate for the yuan and dollar, but from next year it will adopt a direct quote between the won and yuan".

Concerns about Beijing keeping the yuan artificially low to help exporters is one reason the currency has previously failed to meet the criteria for reserve currencies set out by the International Monetary Fund.

Authorities of all currencies represented in the SDR basket, which now includes the Chinese authorities, are expected to maintain a policy framework that facilitates operations for the International Monetary Fund, its membership and other SDR users in their currencies.

The central bank will keep intervene in currency markets to prevent excessive fluctuations recently, Mr. Yi said: "It's important to keep the yuan stable at a reasonable and equilibrium level".