After US dollar, which of the following currencies has largest weightage in determining the value of SDR?

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UGC Paper 2: Commerce 26th June 2019
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  1. Japanese Yen
  2. Chinese Yuan (Renminbi)
  3. Euro
  4. British Pound

Answer (Detailed Solution Below)

Option 3 : Euro
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UGC NET Paper 1: Held on 21st August 2024 Shift 1
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Detailed Solution

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After the US dollar, Euro has the largest weightage in determining the value of SDR

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Explanation:

  1. The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. 
  2. The SDR was created as a supplementary international reserve asset in the context of the Bretton Woods fixed exchange rate system. 
  3. The SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar.
  4. After the collapse of the Bretton Woods system, the SDR was redefined as a basket of currencies.
  5. The value of an SDR is based on a basket of key international currencies reviewed by IMF every five years. 
  6. The weights assigned to each currency in the XDR basket are adjusted to take into account their current prominence in terms of international trade and national foreign exchange reserves.
  7. In the review conducted in November 2015, the IMF decided to add the Renminbi (Chinese yuan) to the basket, effective 1 October 2016. 
  8. Since that date, the XDR basket has consisted of the following five currencies: U.S. dollar 41.73%, euro 30.93%, the renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%, British pound 8.09%.
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