Yuan expected to get low SDR weighting
Mainland unit likely to be included in basket after IMF chief's backing
The yuan is expected to be a shoo-in for the International Monetary Fund's reserve currency basket after its managing director Christine Lagarde's public endorsement of the currency, but its inclusion may come with a lower weighting.
Speculation is mounting on the calculation metrics of a yuan inclusion as the IMF readies to review the composition of the special drawing rights basket this week.
The SDR, an account unit of the IMF, is rarely used in daily financial transactions. Currently made up of the US dollar (a weighting of 41.9 per cent), euro (37.4), pound (11.3) and yen (9.4), its membership in the elite currency club is seen as an acknowledgement of China's political and economic heft.
In an August report by the IMF, the yuan was estimated to have a weighting of between 14 and 16 out of 100, based on the existing methodology, which is skewed towards the share of exports by the currency's issuing country.
However, over the past few weeks, the IMF has dropped hints the formula is being revised and that the actual weighting may be about 10 per cent.
"To some extent, it's anybody's guess what the weight would be," said Andy Seaman, the chief investment officer at London-based Stratton Street.
He estimates the yuan to get a weighting of 10 per cent. In 2012, Stratton forecast the yuan to have a 10.5 per cent weighting in the forthcoming review, surpassing the yen (8.4), pound (10.1) and trailing the euro (33.4) and dollar (37.6).
