Special Drawing Rights

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Special Drawing Rights is neither a currency, nor a claim on the International Monetary Fund. Rather, it is a potential claim on the freely usable currencies of IMF members.

SDRs are defined in terms of a basket of major currencies used in international trade and finance. At present, the currencies in the basket are the euro, the pound sterling, the Japanese yen and the United States dollar. The amounts of each currency making up one SDR are chosen in accordance with the relative importance of the currency in international trade and finance. The determination of the currencies in the SDR and their amounts is made by the IMF Executive Board from time to time.

The value of one SDR in terms of United States dollars is determined daily by the IMF, based on the exchange rates of the currencies making up the basket, as quoted at noon at the London market. (If the London market is closed, New York market rates are used; if both markets are closed, European Central Bank reference rates are used.)

SDRs are used as a unit of account by the IMF and several other international organizations. A few countries peg their currencies against SDRs, and it is also used to denominate some private international financial instruments.

SDR's basically were created to replace gold in large international transactions. Being that under a strict (international) gold standard, the quantity of gold worldwide is relatively fixed, and worldwide the economies of all participating IMF members as an aggregate are growing, a need arose to increase the supply of the basic unit or standard proprotionately. Thus SDRs, or "paper gold" are credits that nations with balance of trade surpluses can 'draw' upon nations with balance of trade deficits.

So-called "paper gold" is little more than an accounting transaction within a ledger of accounts, which eliminates the problem of shipping gold back and forth across borders to settle national accounts.

SDRs have the ISO 4217 currency code XDR.

The latest value of the SDR in terms of the US dollar is available from the IMF, updated daily.

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