Chinese Yuan Poised to Join Reserve Currency Basket

Many experts and policymakers are watching today for the announcement that the Chinese yuan (also called the renminbi) will be added to the IMF’s Special Drawing Rights basket.

The IMF uses a basket of currencies, called Special Drawing Rights, as a defacto currency. This asset can be used for transactions between the IMF and central banks around the world. Christine Lagarde, the head of the IMF, backs the idea of including the yuan in the basket, and the move is expected to be voted on today.
Adding the yuan to the basket of currencies would mark the first time that a currency has been added since the inclusion of the euro in 2000. The currencies that current make up SDRs are the US dollar, euro, UK pound, and Japanese yen.
One of the reasons the Chinese yuan is likely to be included has to do with the country’s huge rise to global economic prominence in the last couple of decades. Additionally, it doesn’t hurt that China has plans to let the yuan float more freely on the market as the next decade gets under way.

If you have any questions, comments or opinions regarding the Chinese Yuan,
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