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Home / News / World News / China's Yuan joins IMF's list of reserve currencies
  • World

    China's Yuan joins IMF's list of reserve currencies

    Supriya
    Written by
    Supriya
    Mail
    Last updated on Oct 02, 2016, 07:20 am
    China's Yuan joins IMF's list of reserve currencies
  • The Chinese Yuan will enter International Monetary Fund's (IMF) reserve-basket of currencies with 'Special Drawing Rights' (SDR).

    This is the first time a currency has been added to the IMF's reserve list since 1999.

    IMF Managing Director Christine Lagarde described this inclusion as a "historic" and said, "it reflects the progress that the Asian country has made in reforming its financial-systems and liberalizing markets."

  • In this article
    Bretton Woods System Collapse of the Bretton Woods System SDR's significance undervalued post Bretton Woods Collapse China's Yuan joins IMF's list of reserve currencies IMF's Reserve Currencies Reserve Currencies with Special Drawing rights Determining SDR's value
  • Origins

    Bretton Woods System

    Bretton Woods System
    Credits:
  • In 1944, the Bretton Woods System (BWS) was established for monetary and exchange management.

    Under this system the dollar was measured against gold and other currencies were pegged to the dollar, making it the 'key reserve currency'.

    The IMF which was established under BWS, created SDR in 1969: SDR was a 'supplementary international reserve asset' in context of the prevailing fixed-exchange rate system.

  • 1968 - Mid-70s

    Collapse of the Bretton Woods System

    Collapse of the Bretton Woods System
  • The U.S. dollar's fixed value against gold under the Bretton Woods System, was perceived to be overvalued.

    In 1971, the then U.S. President Richard Nixon, temporarily suspended the dollar's convertibility into gold.

    In 1973, an attempt to revive the 'fixed exchange rate' system failed and Bretton Woods System finally collapsed.

    Currencies of major economies then began to float against each other.

  • Information

    SDR's significance undervalued post Bretton Woods Collapse

  • Floating currencies adopted by major economies post Bretton Woods reduced SDRs' significance as a global reserve asset. SDR was then redefined as a basket of currencies. In 2009, SDR witnessed a resurgence by ensuring liquidity to the global economic system during the global financial crisis.

  • 02 Oct 2016

    China's Yuan joins IMF's list of reserve currencies

    China's Yuan joins IMF's list of reserve currencies
  • The Chinese Yuan will enter International Monetary Fund's (IMF) reserve-basket of currencies with 'Special Drawing Rights' (SDR).

    This is the first time a currency has been added to the IMF's reserve list since 1999.

    IMF Managing Director Christine Lagarde described this inclusion as a "historic" and said, "it reflects the progress that the Asian country has made in reforming its financial-systems and liberalizing markets."

  • Information

    IMF's Reserve Currencies

  • The existing list of reserve currencies include the Japanese Yen, the US dollar, the British pound and the euro. The Chinese 'yuan' also known as the renminbi, or "people's money" is the newest addition to this list.

  • About

    Reserve Currencies with Special Drawing rights

    Reserve Currencies with Special Drawing rights
  • Reserve currencies are held in large quantities by governments and major financial institutions to repay international debt obligations or conduct global transactions.

    The SDR was conceived in 1969 to measure a country's reserve assets with IMF. It's not a freely traded 'currency' but is used by the IMF for internal accounting purposes.

    IMF issues loans to countries denominated in SDR to manage financial crisis.

  • Data

    Determining SDR's value

  • The currency value of SDR is determined by summing the basket of major currencies (dollar, euro, yen, pound and yuan) in U.S. dollars, based on current exchange rates. SDR's currency value is calculated daily and the valuation basket is reviewed and adjusted every five years.

  • China News
  • IMF
  • International Monetary Fund
  • Christine Lagarde
  • US
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