Date
24 January 2017
The renminbi is yet to meet the IMF’s key criterion that reserve currencies must be “freely usable". Photo: Bloomberg
The renminbi is yet to meet the IMF’s key criterion that reserve currencies must be “freely usable". Photo: Bloomberg

IMF freezes SDR currency basket, deferring any yuan move

The International Monetary Fund (IMF) has indicated that China’s renminbi won’t be added to the fund’s basket of reserve currencies for at least a year.

The IMF’s executive board on Wednesday approved an extension of the current basket of reserve currencies included in the special drawing rights, or SDRs, to Sept. 30, 2016, the Wall Street Journal reported.

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.

A decision on the future basket is expected by the end of the year.

China devalued the renminbi in a surprise move last week, guiding the unit to its biggest one-day slide in two decades.

Officials in Beijing said the move was part of a plan to allow the market a greater role in exchange rates.

The IMF said last week that the Chinese central bank’s announced change “has no direct implications for the criteria used in determining the composition of the basket.”

Although Beijing has outlined plans to liberalize its financial markets, the yuan is yet to meet the IMF’s key criterion that reserve currencies must be “freely usable”, the Journal noted.

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RC

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