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IMF’s Inclusion of Yuan to Special Drawing Rights Basket Won’t Mean Much for Investors

11/30/15 4:53 PM EST
The International Monetary Fund’s decision to include China’s yuan currency in its special drawing rights basket won’t amount to a whole lot for investors, according to one expert. ‘It’s not like when a stock gets added to the S&P 500, where all of a sudden there are fund managers that need to buy it,’ said Greg Anderson, head of FX strategy at BMO Capital Markets, based in New York. ‘Nobody needs to go out and buy renminbi tomorrow because it was put in the SDR basket - no one buys the SDR basket, but it’s a symbol that the IMF approves of what the reformers have been doing with the currency.’ The yuan’s reserve status puts it on similar footing as the dollar, euro, pound and the Japanese yen, currencies already included in the prestigious basket. But with this, the pressure is on for China to become transparent and allow its currency to trade more freely. ‘The reformers in China have won a big victory,’ Anderson said. ‘I think it is an important step along the path towards what I think everyone wants them to get to eventually, which is a freely traded and floating currency.’ TheStreet’s Scott Gamm has details from New York.
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