The IMF announced that it will extend the current basket for nine months to allow the "smooth functioning of SDR-related operations" and in response to "feedback from SDR users on the desirability of avoiding changes in the basket".
The extension will also give users sufficient time to adjust if a new currency were added to the basket, the IMF said.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on they value of several international currencies – currently the US dollar, euro, yen and pound sterling. China is keen to see the yuan added to the basket.
The benchmark currency basket is reviewed every five years. The proposed extension was suggested by staff in a paper published in August, the IMF said, and submitted to the executive board for review, the IMF said.
The value of the yuan fell after the news was released, the Wall Street Journal said.
Shanghai-based Yan Geng of Pinsent Masons, the law firm behind Out-Law.com said: "According to the very limited Chinese media reports on this topic, it seems that Chinese government and People’s Bank of China do not intend to include the Chinese yuan in the SDR in a hurry. The Chinese government plans to implement prudent internationalisation of the Chinese yuan, and it won’t compromise much with the IMF in order to get the Chinese yuan included in the SDR. On the other hand, the inclusion of the Chinese yuan in the SDR won’t have any significant impact on China’s economic situation."
The IMF welcomed a change to China's central parity rate last week, saying that the People's Bank of China's (PBOC) change to the mechanism for setting the daily exchange reference rate "appears a welcome step" as it will allow market forces to play a greater role in determining the exchange rate.
The IMF said at the time that the change to the mechanism has "no direct implications" on the criteria used for inclusion in the SDR, but that "a more market-determined exchange rate would facilitate SDR operations in case the RMB were included in the currency basket going forward".