Update | International Monetary Fund approves reserve currency status for China's yuan
The inclusion of the yuan in the Special Drawing Rights basket - alongside the US dollar, euro, yen and British pound - could put it under pressure to weaken
The International Monetary Fund has approved the inclusion of the yuan among its Special Drawing Rights currencies at a board meeting in Washington, a move analysts say will put the currency under pressure to weaken.
The yuan, also known as the renminbi, will join the US dollar, euro, Japanese yen and British pound in the basket of currencies the IMF uses as an international reserve asset.
The IMF said on Monday that the yuan “met all existing criteria” to be included as one of the currencies used for the global organisation’s SDR, which is used as the standard for dealing with its 188 member governments.
READ MORE: Six key things to know about the vote on China’s yuan joining the IMF basket of currencies
The Chinese currency will have a weight of 10.92 percent in the basket. It is lower than the dollar's 41.73 percent and 30.93 percent for the euro but above the Japanese yen's 8.33 percent and British pound's 8.09 percent. The addition will take effect on October 1, 2016.
Currently the weights of the dollar, euro, pound and yen are 41.9 percent, 37.4 percent, 11.3 percent and 9.4 percent respectively.
The move is seen as recognition of China's financial and economic progress after years of reform, though the authorities may take time to deliberate on how to further improve.
