The worst year for the euro can be even sadder: International Monetary Fund has included the Chinese yuan in the basket of reserve currencies. Now euro zone currency’s weighting in the IMF’s SDR basket will drop to 30.93 percent from 37.4 percent, the organization said yesterday. The yuan will join the dollar, euro, pound and yen in the SDR from Oct. 1, 2016. Its part will be approximately 10-11 percent.
This year the euro has tumbled 13 percent against the dollar yet, and central banks have reduced the proportion of the currency in their reserves to the lowest since 2002. European Central Bank President Mario Draghi signaled that they are open to boosting stimulus on the next ECB meeting.
“The euro will get the most impact from this weight adjustment,” said Douglas Borthwick, head of foreign exchange at Chapdelaine & Co. “The IMF is taking from euro to give to China; the other rebalancing amounts are largely negligible.”
Most likely, China’s yuan will exceed yen and sterling in the new IMF's basket. The levels will be 41.73 percent for the dollar, 8.33 percent for the yen and 8.09 percent for the pound, the IMF said.
It’s the first change in the SDR’s currency composition since 1999, when the euro replaced the Deutsche mark and French franc. The IMF reviews the basket every five years and rejected the yuan during the last review, in 2010.
The euro has dropped 5.3 percent this quarter against the dollar, it was at $1.0602 as of 13:15 GMT after reaching a seven-month low of $1.0558 on Monday.