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Was IMF Head Dominique Strauss Kahn arrested over SDR Bonds?

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« on: May 19, 2011, 01:59:30 pm »


FEBRUARY 19, 2011, 2:15 P.M. ET

UPDATE: IMF's Strauss-Kahn Wants The Yuan In SDR

  By Nicolas Winning and William Horobin
  Of DOW JONES NEWSWIRES
 
PARIS (Dow Jones)--The head of the International Monetary Fund, Dominique Strauss-Kahn, said Saturday he wants China's yuan to be included in the basket of currencies that make up the fund's alternative reserve currency--but it would have to be at least partly convertible first.

Finance officials from the Group of 20 industrialized and emerging countries agreed Saturday to look at whether the role of the Special Drawing Rights, or SDR, in the global monetary system should be expanded.

"I will be personally very in favor of having the renminbi in the SDR as soon as possible, but in one way or other it means that the renminbi has to be, if not totally freely convertible, at least partly convertible for the part which will be in the SDR," he told reporters after the G20 meeting.

The French--who hold the rotating presidency of the G20--have been using the inclusion of the yuan in the SDR as a way of approaching the thorny issue of China's currency.

U.S. and other developed markets want China to let the yuan--also known as the renminbi--appreciate faster because they feel its relative weakness crimps the export power of their economies. But China says too quick an appreciation of the yuan could damage the Chinese economy.

French Finance Minister Christine Lagarde said Monday the yuan would be included in that expansion as soon as China has fulfilled the required conditions on the convertibility of its currency

Strauss-Kahn said the yuan is clearly a big enough currency to satisfy the size criteria to be included in the SDR, which includes the dollar, the yen, the euro and the U.K. pound.

"The problem is there's another one [criteria], which is that it has to be a currency that is freely valued by the market and it's not," he said.

The IMF head said he has had many opportunities to talk with Chinese government and central bank officials and those discussions have been "very open."

"I think that would be good for China because it would lead to a more open economy and clearly that is what China aims to do," he said.

Strauss-Kahn said the SDR has a number of advantages, notably that it less volatile than other currencies. It can also be used to price commodities and issue bonds, he added.

Strauss-Kahn said it was also urgent for Europe to pursue further economic coordination. Some countries needed to carry out aggressive fiscal adjustment while others could pursue a more medium-term adjustment, he said without naming any specific countries.

"Europe can't function with deficits that bring debt to around 100% [of gross domestic product]. Simply, they will no longer be able to borrow as lenders won't lend anymore."

"European growth can strengthen quicker...if necessary economic policies are implemented," Strauss-Kahn said.

http://online.wsj.com/article/BT-CO-20110219-702023.html
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