The International Monetary Fund (IMF) decided in Washington to raise the weight of the yuan and the dollar in the composition of the Special Drawing Rights (SDR), the IMF unit of account that serves as an international reserve, which consolidates the status of the Chinese currency and reduces the share of the euro, the yen and the pound sterling in the calculation of the SDR.
Thus, the weight of the yuan, or renminbi, went from 10.92% to 12.28% in the weight of the basket of currencies that define the value of SDRs (the dollar, the euro, the pound sterling, the renminbi or Chinese yuan and the Japanese yen), according to a press release from the agency, quoted by AFP.
At the end of the IMF’s five-year review of the weighting of this basket of currencies, The weight of the dollar also rose, which came to represent 43.38% instead of the previous 41.73%, the Fund said in a statement.
This represents an increase of 1.65 percentage points, greater than the increase in the weight of the Chinese renminbi.
As of August 1, 2022, the IMF has determined that the five currencies that meet the selection criteria for inclusion in the SDR valuation basket will be assigned the following weights based on their roles in international trade and finance:
* US dollar 43.38 percent
* Euro 29.31 percent
* Chinese Renminbi 12.28 percent
* Japanese yen 7.59 percent
* British pound 7.44 percent
The amounts of each of the five currencies will be calculated on July 29, 2022 (transition date) according to the new pesos and will take effect on August 1, 2022.
In 2016, the Chinese currency entered the very closed club of the main international reserve currencies by integrating the SDR, a measure considered a historic and symbolic step in the internationalization of the renminbi, something sought after by Beijing in its search for international economic recognition.
This strengthening of the participation of the yuan in the indicator comes at a time when the Chinese currency is experiencing a sharp depreciation.
Its price, which evolves in a range controlled by the Chinese state, has recently accelerated its decline and stood at 6.7893 renminbi per dollar on Friday.
This is its lowest for almost a year and a half, weighed down in particular by the slowdown in activity due to the fight against Covid-19.
Directors agreed with the Managing Director’s proposal that the next SDR review take place every five years and be completed by the end of July 2027.
