Special Drawing Rights, or ‘SDR’ with XDR as its currency code, are rights to a currency that is connected to this virtual currency. There are no SDR coins or bills in circulation and the goal is to circumvent large fluctuations in the currency markets. The XDR is basically a basket of important reserve currencies  from all over the world. The weighting is 41.9% US dollar, 37.4% euro, 9.4% yen, and 11.3% British pound at the moment.

SDR History

The composition of the XDR changes every 5 years. Before the euro, the German mark and the French franc were included and even the Dutch gulden and the Belgian frank were once included in the SDR from 1974 to 1980. This happened in light of the decoupling of gold and the dollar in 1971 under Nixon’s rule. At the start in 1969, the SDR was equal to 0.888671 grams of gold – until 1974. Below you can see a table reflecting the history of the XDR.

The price of the XDR does not just fluctuate, it also gets determined every day. On January 1st of 2016, the composition of the XDR will change once again. The most common changes are in the weighting of the existing SDR basket. Since the arrival of the euro, no additional currencies have been added to the basket. If we can state that the German mark and the French franc pretty much represented the euro beforehand, the composition really has not changed currency-wise since 1981.

Future of the SDR

Most likely this will change nevertheless. Both the IMF as well as China openly confirmed that the RMB will very likely join the basket when the new period starts. There are even rumors that gold could make a comeback into the basket of SDR currencies, which could positively impact how gold’s perception as ‘currency’. There are also speculations regarding the admittance of the Canadian dollar and the Swiss franc; also important currencies within the financial system. Below you can see a few scenarios for the SDR for 2016. In October the finalized composition will be published, which will then be implemented from January 1st, 2016. Especially for gold and the Chinese currency, exciting times are ahead!