The yuan as SDR currency - what next?
The short-term impact on the global economy and financial markets is likely to be limited.
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THE International Monetary Fund (IMF) issued a new staff report on Nov 13 supporting the inclusion of the renminbi in the Special Drawing Rights (SDR). Assuming the IMF executive board approves the proposal at its meeting on Nov 30, the question is what will come next?
What are the implications of the renminbi becoming an SDR currency? Will the global economy and financial markets benefit from an era of greater stability going forward, with the renminbi providing an alternative source of global liquidity?
In recent years, investors and governments drawn to the liquidity and security of the US dollar have relied extensively on the greenback, resulting in dislocations (as well as benefits), including historically and prolonged low borrowing costs in the 2000s causing asset bubbles. Is there hope that we may begin to shift away from the US dollar's dominance?
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