Intl Monetary Fund SDR - How is the IQD Affected?

[ErichK]

The Hype on the internet for 10-1-16, when the Chinese Renmibi (yuan) is added to this basket of Special Drawing Rights implies the dollar will crash. The IMF site says the US dollar percentage will remain unchanged appx 41% ( http://www.imf.org/external/np/exr/faq/sdrbsktfaq.htm). Can anyone with professional Forex experience explain how this will impact the dollar. Not only for this investment, but the dollar as a reserve currency?

[climber7]

6 hours ago, ErichK said:

The Hype on the internet for 10-1-16, when the Chinese Renmibi (yuan) is added to this basket of Special Drawing Rights implies the dollar will crash. The IMF site says the US dollar percentage will remain unchanged appx 41% ( http://www.imf.org/external/np/exr/faq/sdrbsktfaq.htm). Can anyone with professional Forex experience explain how this will impact the dollar. Not only for this investment, but the dollar as a reserve currency?

                  ^

Ya....what HE asked..... 

[new york kevin]

I have no Forex knowledge. Just what I have picked up from this site and Breitlingcurreny.blogspot.com.  Such a move will doubtfully decrease the strength of the USD, nationally or internationally. It has the potential of strengthening the Yuan, depending on the increase in velocity of the Yuan internationally. A increase in velocity is equal to the increased use of the Yuan. ErichK, your thread mentioned the IMF says the US DOLLAR % will remain unchanged at 41%. On what index I am not sure. But using that figure, if the US DOLLAR velocity on said index remains unchanged after the Yuan was included in the basket of currencies then it won'the effect the US DOLLAR.  I suspect that 41%, reflexs the % of times international trade deals are requested to be paid in/transacted in said currency, in this case, USD. In DV land we would say Iraqi oil is purchased by China, Iraq could accept the Yuan, or Iraq could request USD for the deal, or any of the 5 or 6 currencies in the basket potentially. Iraq could make a deal for all transactions to be made in IQD, if they reciprocate and use the currency of "that" country. Iraq/CBI, made such an agreement with India sometime over the past few years and it was hailed as the step just prior to an RV, which it wasn'the. It just raised the potential of the IQD being able to sustain a higher international exchange rate, since more countries using the IQD when doing business with Iraq, would thereby increase the velocity of the IQD. Not on a level to effect the velocity behind the US DOLLAR,  just enough to strengthen the value of the IQD.   Back to the 41% figure you used, and the supply of physical notes of any country times the velocity. In this case, the US DOLLAR is used by 41% of all worldwide business transactions (I did not yet read your link). Note also that 65 - 70 % of all countries in the world hold USD in their Central Banks Reserves. Here, in other words, the market rate valuation of 65 - 70% of the world's currencies is based on that country's assets. Which are made up of GDP, precious metals, USA and etc. So, not only does the US DOLLAR sustain it's solid valuation because of international trade deals (41%) , it maintains its valuation/market rate due to the number of countries that hold it in their reserves. Boom and boom.

We often hear that the $ isn't  worth what it used to be anymore. That any given administration is merely printing more and more dollars/physical notes to pay it's  Bill, or for whatever reason. While we are printing more and more physical notes , and thus lowering the valuation of the US DOLLAR,  we are doing so to remain competitive with other countries that have a lower cost of labor. Our market rate would  have risen drastically against any given currency if we didn'the dilute that pool by increasing the number of physical USA notes in circulation. Since we cannot compete cost of labor wise with certain countries in manufacturing,  we maintain a relatively on par monetary or economic competitiveness by printing $. Not every country can do this, Zimbabwe can't, but we can based on the supply of physical notes times the velocity; the number of times USD is used. This principle has been seen on this website and the IQD. How many times have we read that  the US DOLLAR flooded the Iraqi domestic economy,  In order to prop it up, while we shocked and awed them. Then after we won (and before we lost it again), and the new IQD was printed and circulated, that we heard the value/market rate of the IQD skyrocketed.  This was frowned upon because the plan was to rebuild Iraq on the cheap. Won't  be rebuilt on the cheap if the value increases. So we flooded the country with even more dollars to compete with the IQD domestically. While  the CBI  printed more IQD. This kept the value of the IQD down. Iraq was built on the cheap. Now the CBI is working to de-dollarize the country, and simultaneously withdraw the excessive amounts of physical IQD notes in circulation.  They are also artificially keeping the value at 1170 or so. Thus the hope springing eternally that this suckered will RV like frigging soon. Consider also al so the myriad of steps the GOI/CBI have " made in the right direction ." But I maybe wrong. Much love ya'll .