IMF hints at including the renminbi in its SDR list
The Dollar Business Bureau The war against the US dollar’s supremacy seems to be all set for another major battle with even the IMF endorsing China’s push to include the renminbi in the list of currencies in which assets can be held under the IMF’s Special Drawing Rights (SDRs). “While undervaluation of the renminbi was a major factor causing large imbalances in the past, our assessment is that the substantial real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued,” IMF’s first deputy managing director David Lipton said recently in Beijing. While Lipton didn’t openly claim that the IMF is ready to include the renminbi in the SDR list, many see his statement as a first step towards the same, which will greatly enhance its status and make it an official reserve currency of the world. It’s worth noting that the SDR is a not really any kind of right but allows IMF members to exchange their currencies with any of the SDR currencies – a mechanism that was of great help to many countries during the GFC. It’s also worth noting that the inclusion of the renminbi in the SDR list is a must if China wants to realise its dream of being able to trade with its allies in renminbi, thereby breaking the hegemony of the US dollar.
May 28, 2015 | 7:36 pm IST.