The fund’s executive board approved an extension of the current basket of reserve currencies included in its special drawing rights, or SDRs, to September 30, 2016.
Advertisement
Lagarde has said adding the yuan to the basket is a “question of when”. The next review is expected to be completed by end-2015, with any decisions affecting the current SDR basket to become effective starting October 2016.
In comparison to the large moves made by the Yuan’s last week – after multiple sharp declines following the People’s Bank of China move to change its fixing mechanism – this expected extension had relatively small effect on the Yuan.
Beijing, keen for its currency to have equal billing with the euro, yen, pound and dollar, has been pushing for the yuan to be included in the SDR basket, which determines the mix of currencies that countries like Greece receive as International Monetary Fund disbursements.
On August 4 the IMF said the currency, which has been tightly managed by the Chinese central bank, fell short of meeting all the standards for inclusion, particularly on being “freely usable” in worldwide finance.
Joining the basket would give the yuan the IMF’s seal of approval and might encourage foreigners to use the Chinese currency more and to have more confidence in China’s financial markets.
The yuan has dropped significantly against the US dollar this month since Chinese authorities adjusted the way the currency is calculated to open up the trading day.
When talking about ‘s recent reform in forex policy, which brought last week’s depreciation of the yuan, Rodlauer called the move praiseworthy as it allows a greater role for market forces in ‘s currency. “The schedule is moving along according to script”.
This month’s yuan devaluation could help China’s slowing economy but raised hackles from U.S. manufacturers.
Advertisement
The action confirms an earlier proposal for a delay in the five-year reshuffling of the basket, which doesn’t include the yuan, the report noted.
