Yuan�s SDR admission to nudge Pula downwards

Jefferis
Jefferis

SHENZHEN, CHINA: This week’s admission of the Chinese Yuan into the IMF’s elite global reserve currency basket, the Special Drawing Rights (SDR), will possibly exert downward pressure, though minimal, on the value of the Pula, analysts reckon.

At an executive board meeting in Washington D.C. on Monday, the IMF determined the Yuan to be now a freely usable currency and will, effective October 2016, be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese Yen and the British Pound.  Under the crawling peg exchange rate regime, the Bank of Botswana (BoB) manages the Pula’s value in a “basket of currencies” assigning weights to each currency. The basket of currencies comprises the South African Rand (ZAR), which has a 50 percent weight with the remainder assigned to the SDR.

Research manager at First National Bank of Botswana, Moatlhodi Sebabole, believes the Pula, which has been weakening against the SDR currencies and gaining against the Rand in the recent past, will feel the pressure of the Yuan’s admission into the SDR basket.

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