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What is IMF’s SDR (Special Drawing Rights)?
SDR stands for Special Drawing Rights. It was originally created in 1969 as a new international reserve asset by the IMF (with value initially at 0.888671 grams of fine gold, or one U.S. dollar at the time) under the now defunct Bretton Woods fixed exchange rate system, where countries would maintain their exchange rates by tying their currency to gold.
The system ended when the U.S. unilaterally terminated convertibility of the US dollar to gold in 1971, and many fixed currencies became free-floating.
As a result, SDR became less useful two years after its inception, and the IMF subsequently redefined it as a basket of currencies, consists of the euro, yen, pound sterling, dollar, and most recently the yuan. Value of the SDR to the dollar is available daily on the IMF website. Compositions of SDR currencies is usually reviewed every 5 years, with the most recent review took place at the end of 2015.
Next article10 02 2015 | by Victor Xing | Capital Markets