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    Special Drawing Rights (SDRS) : by Gopika Kondath 1512362 Nivedha Vaideeswaran 1512345

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    Lalit Shah
    The document discusses Special Drawing Rights (SDRs), a unit of reserve assets defined by the IMF. SDRs were created in 1969 to support the Bretton Woods system of fixed exchange rates. The value of an SDR is based on a basket of 4 currencies - US dollar, euro, pound sterling, and Japanese yen. SDRs can be exchanged between IMF members and are used by some countries to peg their currency values. While SDRs provide a stable reserve asset alternative to gold or the US dollar, their use is limited as only the IMF can allocate SDRs and they are based on only 4 major currencies.

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    Special Drawing Rights (SDRS) : by Gopika Kondath 1512362 Nivedha Vaideeswaran 1512345

    Uploaded by

    Lalit Shah
    36 views14 pages
    The document discusses Special Drawing Rights (SDRs), a unit of reserve assets defined by the IMF. SDRs were created in 1969 to support the Bretton Woods system of fixed exchange rates. The value of an SDR is based on a basket of 4 currencies - US dollar, euro, pound sterling, and Japanese yen. SDRs can be exchanged between IMF members and are used by some countries to peg their currency values. While SDRs provide a stable reserve asset alternative to gold or the US dollar, their use is limited as only the IMF can allocate SDRs and they are based on only 4 major currencies.

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    The document discusses Special Drawing Rights (SDRs), a unit of reserve assets defined by the IMF. SDRs were created in 1969 to support the Bretton Woods system of fixed exchange rates. The value of an SDR is based on a basket of 4 currencies - US dollar, euro, pound sterling, and Japanese yen. SDRs can be exchanged between IMF members and are used by some countries to peg their currency values. While SDRs provide a stable reserve asset alternative to gold or the US dollar, their use is limited as only the IMF can allocate SDRs and they are based on only 4 major currencies.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    36 views14 pages

    Special Drawing Rights (SDRS) : by Gopika Kondath 1512362 Nivedha Vaideeswaran 1512345

    Uploaded by

    Lalit Shah
    The document discusses Special Drawing Rights (SDRs), a unit of reserve assets defined by the IMF. SDRs were created in 1969 to support the Bretton Woods system of fixed exchange rates. The value of an SDR is based on a basket of 4 currencies - US dollar, euro, pound sterling, and Japanese yen. SDRs can be exchanged between IMF members and are used by some countries to peg their currency values. While SDRs provide a stable reserve asset alternative to gold or the US dollar, their use is limited as only the IMF can allocate SDRs and they are based on only 4 major currencies.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 14

    Special Drawing

    Rights
    (SDRs)
    By Gopika Kondath 1512362
    Nivedha Vaideeswaran
    1512345
    Contents
    IMF quick facts
    Definition
    Purpose
    Structure
    Pros & cons
    Trends
    Current rates and Valuation
    Top Stories
    ITERNATIONAL MONETARY FUND
    (IMF)
    The International Monetary fund (IMF) is an organization of
    188 countries, created in 1945.
    AIMS
    Promote international monetary cooperation.
    Facilitate the balanced growth of international trade.
    Promote employment, sustainable economic growth.
    Headquartered in Washington D.C, with 24 Directors at the
    Executive Board.
    Definition
    Special Drawing rights (SDR) are the monetary unit of the
    reserve assets of the International Monetary Fund (IMF).
    The unit was created in 1969 in support of the Bretton
    Woods system of fixed exchange rates to alleviate the
    shortage of U.S dollar and gold reserve in the expansion of
    international trade.
    The SDR unit is defined as a weighted sum of contributions
    of four major currencies, re-evaluated and adjusted every
    five years, and computed daily in terms of the USD.
    The currencies are-U.S. dollars ($), euro (), pounds sterling
    (), Japanese yen ().
    Purpose
    SDRs are used as a unit of account by the IMF and several
    other international organizations. A few countries peg their
    currencies against SDRs, and it is also used to denominate
    some private international financial instruments.
    Inthe Euro Zone, the Euro is displacing the SDR as a basis to
    set values of various currencies, including the Latvian Lats.
    SDRs were originally created to replace gold and silver in
    large international transactions and provide cost free
    alternative to member states for building reserves.
    Structure of the SDR
    The IMF is responsible for all transactions, i.e. the IMF acts as a broker.
    2 types of SDR transactions:
    (a) Voluntary : Transactions take place with a voluntary counterparty.
    (b) Designation: In case no voluntary counterparty can be found, the IMF
    designates the counterparty.
    2 Types of allocation:
    (a) General: Based on long term need to increase existing reserve assets.
    (b) Specific: ensure all members of IMF the relative same amount of
    SDRs, since countries join the IMF at different times.
    Structure of SDRs (continued)
    SDRs are equal to a basket of 4 currencies with fixed amounts, however
    due to changing FX rates the relative weightings change with last time.
    If a country has more SDRs than allocated by the IMF it receives SDR
    interest from the IMF, and if a country has less SDRs than allocated by
    the IMF, it has to pay interest to the IMF.
    No Bid/offer spread
    IMF calculates SDR interest rates on an weekly basis.
    Interest rates calculated on the basis of 3 months Eurepo, 3 months
    Japanese Treasury Discount Bills, 3 months UK treasury bills and 3
    months U.S Treasury Bills.
    Pros & Cons
    PRO SDR CONTRA SDR

    Stable( due to basket of


    Liquidity
    currencies, i.e. diversified Shifting the problem from the USD to
    reserves) the SDRs.

    No exorbitant privilege for the Advantage of SDR over a diversified


    reserve basket.
    USA
    Contains only 4 currencies.
    A way of developing countries
    (w/ weak currencies ) Geopolitical risks
    IMF voting power
    Less risk for countries while
    lending Limited no. of currencies
    Current Rates
    The regularly updated rates of the SDR will be displayed on
    the IMF website.
    Valuation
    The valuation can be viewed on the IMF website.
    Top Stories About The SDR
    IMF SDR review set to boost SSA demand for RMB pro
    ducts, hedging
    A positive outcome to this year's review by the International
    Monetary Fund (IMF) of the potential inclusion of the
    renminbi into its Special Drawing Rights (SDR) facility could
    give a boost to interest in the currency from sovereigns,
    supranationals and agencies (SSAs), say market participants.
    Meanwhile, the IMF review is progressing, with the
    multilateral busy gathering data on trading flows.
    Top Stories (continued)
    Renminbi
    SDR inclusion still debated, but benefits could go both ways
    The inclusion of the renminbi in the International Monetary Fund's
    Special Drawing Rights (SDR) currency basket in the next SDR review
    later this year is by no means a foregone conclusion. But much
    progress has been made, according to participants at the Offshore
    RMB conference organised by market body Asifma this week in Hong
    Kong.
    RMB fits the bill for SDR inclusion, say analysts
    The International Monetary Fund (IMF) could give the RMB a much
    needed credibility boost this year by including it in its special drawing
    rights (SDR) facility.
    Thank You

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