The yuan and only

Adding the RMB to the SDR

The significance of the IMF’s decision on including the RMB in the SDR is in the detail. The headline should not be a surprise to anyone, but the reshuffle of the SDR weights is quite telling.

This is not an exercise in diversifying away from the USD. The USD’s weight is reported to be almost completely unchanged at 42%, with all of the adjustment coming from the EUR, JPY & GBP.

However, even the old SDR weights are more generous to the EUR, JPY and GBP than data on official reserves. The USD dollar dominates at 64% of allocated reserves. RMB holdings are hidden within the 3% that is allocated to “other currencies”. Whatever the headlines about the rise of alternative reserve currencies, the USD remains easily the world’s favourite store of value.