Ans. In view of the limitations of the dollar (or ally other currency), or gold as the international reserve asset, from the later half 1960s, the negotiations over new reserve asset continued. In 1969, the Special Drawing Rights (SDRs) were created. The SDRs were allocated to individual member countries by the IMF in proportion to their quotas-rather like a bonus issue of shares in a company. A country holding SDRs may use them to acquire foreign currency by transferring them to another country in exchange for foreign currency.
The value of the SDR is calculated by
using a currency basket, which includes currencies of members having the
largest exports d goods and services during 1980-84. These include the US
dollar, the Deutsch mark, the Japanese yen, the French franc and the pound
sterling. The dollar value of the SDR is computed daily by using the average of
the buying and selling at mid day on the London foreign exchange markets. In
addition to financing outright purchases foreign currencies, members can now use
SDRs in forward and swap transactions and they can donate SDRS or make SDR
denominated loans to other members.
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