IMF Considers putting yuan into the Basket of Currencies

IMF chief said he is considering to put the Chinese yuan into the basket of currencies that make up the Fund's SDR.

The International Monetary Fund chief Dominique Strauss-Kahn said on Tuesday he is considering to put the Chinese yuan into the basket of currencies that make up the Fund's Special Drawing Rights (SDR).

"I think it will be difficult to include the renminbi before the reminbi really has a market price and is in one way or the other a floating currency. But the sooner, the better," Reuters quoted Mr. Kahn as saying, "Because as time goes by there are more and more reasons to include other currencies in the SDR basket starting with the renminbi."

"I do not expect that things are going to change very rapidly," he said.

He also noted that China's renminbi is still undervalued, but the country's renminbi exchange regime reform, which has started on June 19, may "progressively correct this feature."

Special Drawing Rights, created by the IMF in 1969, are a "quasi currency" that allow nations to increase their foreign exchange reserves without money being borrowed or lent. It was initially set up for the Bretton Woods fixed exchange rate system. With years of adjustment, the value of SDRs is fixed on a basket of dollars, euros, yen and sterling.