IMF poised to put yuan in elite currency basket

WASHINGTON: The International Monetary Fund is expected to approve inclusion of China´s yuan in its SDR basket of elite currencies on Monday, rewarding Beijing´s strong pursuit of the global status.
The IMF executive board is scheduled to meet Monday to decide on the recommendation by staff experts earlier in November to include the yuan, also known as the renminbi, alongside the US dollar, euro, Japanese yen and British pound in the grouping.
While not a freely traded currency, the SDR (special drawing right) is important as an international reserve asset, and because the IMF issues its crisis loans -- crucial to struggling economies like Greece -- valued in SDRs.
China, now the world´s second-largest economy, asked last year for the yuan to be added to the grouping of world reserve currencies, but until recently it was considered too tightly controlled to qualify.
It is extremely rare that the executive board, which represents the International Monetary Fund´s 188 member nations, opposes the recommendation of its own experts. IMF Managing Director Christine Lagarde said in mid-November that she supported the experts´ finding that the yuan had met the requirements to be a ´freely usable´ currency" -- a key hurdle for SDR status.
If accepted, the decision would not take effect before September 30, 2016, to allow users more time to prepare. The last time the SDR basket was modified was in 2000, when the euro replaced the German deutschemark and the French franc.
The remaining question is the yuan´s weight in the basket. It could be 10 percent to 16 percent, but the lower estimate is more likely due to the Chinese currency´s limited convertibility.