More widespread use of the International Monetary Fund's special drawing rights could prevent a currency war, Thierry de Longuemar, chief financial officer at the Asian Infrastructure Investment Bank (AIIB), said on May 4. But the treasurer got little sympathy from other experts at the Asian Development Bank’s meeting.
More widespread use of the International Monetary Fund's special drawing rights could prevent a currency war, Thierry de Longuemar, chief financial officer at the Asian Infrastructure Investment Bank (AIIB), said on May 4. But the treasurer got little sympathy from other experts at the Asian Development Bank’s meeting.
The World Bank broke a 30 year silence in special drawing rights (SDR) bonds with the sale of the SDR500m ($700m) three year note in China on Wednesday. While the Mulan bond is widely seen as a symbolic gesture to promote the internationalisation of the renminbi, market participants said it is more than just that in spite of the relatively narrow investor base.
In April 2015 we surveyed about 1,000 market participants for their views on 12 key topics for the RMB market, including RMB inclusion in the SDR basket of currencies.
Do you expect the RMB to be included in the IMF's Special Drawing Rights basket in this year's review?
Yes - 55%. No - 45%.
Whether the renminbi can get into the International Monetary Fund's special drawing rights basket this year is widely seen as the weather vane of the extent of global acceptance of the currency.
Our survey reflects the general expectation: a little better than a 50-50 chance. The main concern is still full convertibility, as well as the smaller usage of RMB as an investment currency compared to the current SDR basket components. But many point out that China’s rapid and continuous capital account liberalisation, coupled with the RMB’s increasing popularity in international transactions, can serve as a strong argument for inclusion this year.
Assuming it is included in 2015, Société Générale recently predicted it would start with a 7% weighting, lower than yen (9.4%) and sterling (11.3%). But analysts at Bank of America Merrill Lynch estimate its potential weighting could be as high as 13%.
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GC Asia
