November 16, 2010IMF Reduces Weighting of Dollar, Yen in SDR Basket
The International Monetary Fund cut the weighting of the dollar and the yen and increased that of the euro in its Special Drawing Rights valuation basket based on the currencies’ share of global trade.
The value of the SDR, which the IMF created in 1969 to supplement its member countries official reserves, will continue to be derived from a basket of currencies comprised of the dollar, euro, yen and pound, the fund said in an e-mailed statement. UBS AG, the world’s second-largest foreign-exchange trader, said in June the IMF may include the Australian and Canadian dollars in the SDR basket this year. Commodity currency “bulls” will be disappointed at their exclusion, UBS said today in a note to clients.
“There’s a long-term trend towards less U.S. dollars and more euro in terms of where central banks are putting their reserves, and this is consistent with that,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “There was some talk of the IMF putting in other currencies like the Aussie, but they’ve kept to the big four.”
The greenback’s weighting was cut to 41.9 percent compared with 44 percent after a 2005 review, the fund said in its statement dated yesterday. The euro’s share rose to 37.4 percent from 34 percent. The yen’s fell to 9.4 percent from 11 percent, while the pound was little changed at 11.3 percent. SDRs are the Washington-based lender’s unit of account.
The new valuations will be effective Jan. 1, the IMF said.
Chinese Yuan
China’s yuan should “immediately” be included in the SDR basket given its importance to the world economy, Guo Shuqing, Chairman of China Construction Bank Corp., said today in Beijing.
The dollar’s share of global foreign-exchange reserves has been declining. The proportion dropped to 62.1 percent in the second quarter from 65.2 percent in the three months ended March 2009, the IMF said Sept. 30. The allocation to euro rose to 27.8 percent in the third quarter of 2009 from 25.8 percent in early 2009 before slipping to 26.5 percent in the three months ended June 30 amid concern about Europe’s sovereign-debt crisis.
Reserve allocations to other currencies -- which UBS has said consists largely of the Australian and Canadian dollars -- increased to 3.8 percent in the second quarter from 2.1 percent at the start of 2009, according to IMF data.
The changes in weights are a “technical adjustment” and are based on a criterion that’s been in place for a decade, said Bill Murray, an IMF spokesman.
“There was never any plan to revise the currencies at the latest five-year review,” Murray said in response to e-mailed questions. The aim was “to revise the relative weights of the currencies within the existing basket based principally to reflect changes in trade flows since the last review.” http://www.businessweek.com/news/2010-11-16/imf-reduces-weighting-of-dollar-yen-in-sdr-basket.html
Related Articles ~
SDR should include Yuan ~ Nobel laureate, Mundell, calls for yuan's inclusion in IMF basket ...
Joseph Stiglitz : ‘IMF Rerserve Currency Can Be Phased in within a Year and Dominique Strauss 'Yuan May Enter IMF Kitty (Basket) to Evaluate SDR' ...
IMF: Lessen Dependence on Dollar says Dominique Strauss ...
CHINA C. BANK: "The changes are coming" ( they want a basket of currencies)
