China’s Yuan: Special Drawing Rights and another reserve currency in the making

Previously there have been four Reserve Currencies for use by the International community in trading or paying for goods and services rendered across country borders. These Reserve Currencies are: U.S. Dollar, Japanese Yen, Euro, and British Pound. The International Monetary Fund (IMF) has now recognized that the Chinese yuan or renminbi may be considered as another “Special Drawing Rights” currency

“Special Drawing Rights”, a basket of currencies used by the International Monetary Fund (IMF) as its unit of account.  Here’s a definition of “Special Drawing Rights” courtesy of Investopedia:

“An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs are designed to augment international liquidity by supplementing the standard reserve currencies.”

Read more: Special Drawing Rights (SDR) Definition | Investopedia http://www.investopedia.com/terms/s/sdr.asp#ixzz3vkTzRP1z

Bloomberg News outlines the IMF’s role in this monumental event:

http://www.bloomberg.com/news/articles/2015-11-30/imf-backs-yuan-in-reserve-currency-club-after-rejection-in-2010

Here’s an Asian viewpoint of this historical designation:

http://www.koreaherald.com/view.php?ud=20120720000920

The Economist magazine’s view of the new status of the Chinese yuan:

http://www.economist.com/news/business-and-finance/21679341-its-new-status-might-make-weaker-yuan-chinese-renminbi-joins-imfs

I have previously written two posts about reserve currencies and the Chinese devaluation of the yuan. Here are the links for your perusal:

What is a Reserve Currency?

China Devalues its Currency

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