IMF Amends SDR Rounding Methodology

The executive board of the International
Monetary Fund (IMF) has amended its rounding methodology for determining
currency amounts in the Special Drawing Right (SDR) basket.

The decision, reached July 20, was in order
to “make it less complex and also to more closely align the currency weights
with those approved by the IMF executive board,” the IMF says in a statement.

Under the new rounding methodology,
currency amounts will now be rounded to five significant digits based on the
sixth significant digit.

“As in the past, the calculated currency
amounts will ensure that, on the last business day before the new SDR basket
enters into effect (transition date), the value of the SDR in U.S. dollar terms
is the same as the value of the prevailing SDR” the IMF says.

The IMF ruled on November 30 2015 that the
SDR basket will comprise the USD, EUR, RMB, JPY and GBP effective October 1
2016.

Final currency amounts for the new
valuation period will be determined and published on September 30, 2016
(transition date), based on exchange rates from July 1, 2016 through September
30, 2016.

The IMF publishes illustrative currency
amounts in the lead up to the transition date to assist SDR users in preparing
for the changeover to the new SDR valuation basket.

The table below shows illustrative currency
amounts based on the exchange rates for the three-month period up July 25,
2016:
 

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SDR1 = US$ 1.384434

Source: IMF Finance Department

1/ See Decision No. 15891-(15/109), adopted on
November 30, 2015.

2/ Calculation based on average exchange rates
for the three-month period up to July 25, 2016.

3/ An adjustment of 0.00001 was applied to the
U.S. dollar currency amount to meet the equality condition. See
Currency
Amounts in the SDR Basket – Proposed Changes to the Rounding Methodology
(July 13, 2016) for details of calculation and
rounding of currency amounts.

4/ The value in U.S. dollars of one SDR, rounded
to six significant digits.

 

Beatrice@profit-loss.com

Twitter@Profit_and_Loss

Galen Stops

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