MercoPress. South Atlantic News Agency

Weighting SDR's currency basket, Dollar and Yuan up; Euro, Yen and Pound down

In its first regular review of the IMF's SDR valuation, the Yuan share climbed from 10,92% to 12,28%

IMF increased the Chinese Yuan's weighting in the Special Drawing Rights (SDR) currency basket to 12.28% from 10.92% in its first regular review of the SDR valuation since the Chinese currency was first included in the basket in 2016, the Chinese central bank, PCB, reported on Sunday.

The PCB said that as China further steps up efforts to promote the internationalization of the Yuan and the opening up of its financial market, the Chinese currency is expected to play a rising role in global payments, settlements and foreign exchange reserves over the long term.

The updated basket implies slightly higher weightings for the US dollar and the Yuan, and somewhat lower weightings for the British pound, the euro and the yen, the IMF said. The weighting of the US dollar was also raised to 43.38% from 41.73%. The Yuan's weighting remains in third place after the US dollar and Euro.

The adjusted weightings came after the IMF Executive Board concluded its quinquennium SDR valuation review. The updated basket weights will come into effect on August 1 this year, with the next SDR review scheduled be concluded before the end of July 2027, according to the IMF.

The last SDR valuation review was concluded in 2015. Under the existing SDR valuation method adopted by the IMF Executive Board, the currency basket is reviewed every five years unless developments in the interim justify an earlier review.

“Directors broadly acknowledged the progress made on financial market reforms in China, while calling for additional efforts to further open and deepen the onshore Yuan market, with some directors also stressing the need to further enhance data transparency,” said the IMF.

The PBC said in the statement that it will work with other financial departments to continue unswervingly promoting reform and the opening up of China's financial markets, and to simplify the procedures for foreign investors to invest in the Chinese market, enrich the range of investable assets, strengthen data disclosure, and improve the business environment.

According to the latest currency basket, the US dollars has a 43.38% share; Euro 29.31%; China's Yuan 12.28%; Japanese yen 7.59% and Pound sterling 7.44%. Likewise the SDR interest rate will continue to be determined as a weighted average of the interest rates on short-term financial instruments in the markets of the currencies comprising the SDR basket.