The International Monetary Fund (IMF) lifted the yuan’s weighting in the Special Drawing Rights (SDR) currency basket,
- The IMF raised the yuan’s weighting to 12.28 per cent from 10.92 in its first regular review of the SDR evaluation since the Chinese currency was included in the basket in 2016.
- The weighting of the US dollar rose to 43.38 per cent from 41.73 per cent, while those of euro, Japanese yen and British pound declined.
What are SDRSs?
- SDRs are an international reserve asset that can be converted into five currencies.
- The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
- The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members.
- SDRs can be exchanged for these currencies.
- SDR holdings is one of the components of the Foreign Exchange Reserves (FER) of a country. IMF makes the general SDR allocation to its members in proportion to their existing quotas in the Fund.
- The total SDR holdings of India stands at SDR 13.66 billion (equivalent to around USD 19.41 billion at the latest exchange rate) as on August 23, 2021.
- The yuan’s entry into the SDR signaled it became one of the five global reserve currencies in 2016, after years of effort by Chinese authorities to promote its global use.
