Special drawing rights
Special drawing rights (ISO 4217 currency code XDR, also abbreviated SDR) are supplementary foreign-exchange reserve assets defined and maintained by the International Monetary Fund (IMF). The XDR is the unit of account for the IMF, and is not a currency per se.
The value of the XDR is based on a basket of key international currencies reviewed by IMF every five years. 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. From that date, the XDR basket now consists of the following five currencies: U.S. dollar 41.73%, Euro 30.93%, Renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%, British pound 8.09%.
While the ISO 4217 currency code for special drawing rights is XDR,
Special drawing rights were created by the IMF in 1969 and were intended to be an asset held in foreign exchange reserves under the Bretton Woods system of fixed exchange rates. Acting as the unit of account for the IMF has been its primary purpose
One reason XDRs may not see much use as foreign exchange reserve assets is that they must be exchanged into a currency before use. voiced its displeasure at the current international monetary system, and promoted measures that would allow the XDR to "fully satisfy the member countries' demand for a reserve currency." These comments, made by a chairman of the People's Bank of China, Zhou Xiaochuan, drew media attention, and the IMF showed some support for China's stance. It produced a paper exploring ways the substance and function of the XDR could be increased. In 2009, an XDR allocation was made to countries that had joined the IMF after the 1979–1981 round of allocations was complete (and so had never been allocated any). many of the beneficiaries of this 2009 allocation were developing countries.
The value of the XDR is determined by the value of several currencies important to the world’s trading and financial systems.
Firstly, it is widely used in international transactions, including export quotas in the IMF members and the number of official reserve assets which were in their own currencies. Secondly, it is widely traded on the main foreign exchange market, including foreign exchange trading volume, whether there are forward exchange .