Sdr & euro

Presented By :
Ankita shrivastava
Sakshi prakash
M.B.E. (Sem Iv)
SDR – Special Drawing Rights

International foreign exchange reserve

assets. 
Allocated to nations by the International
Monetary Fund  (IMF), a SDR represents a
claim to foreign currencies for which it
may be exchanged in times of need
• The nominal value of an SDR is derived
from a basket of currencies, specifically,
a fixed amount of Japanese Yen, US
Dollar, British Pound and Euros

• SDRs are the International Monetary

Fund's unit of account and are
denoted with the ISO 4217 currency
code XDR.
 value
•Created 1969,
1 SDR was value of
0.888671 grams of gold, the
value of $1 at that time. 

•After the breakdown of

the Bretton Woods system in
the early 1970s, the SDR was
redefined in terms of a basket
For the period of 2006-2010, 1 SDR is
the sum of :

0.6320 US Dollar

0.4100 Euro

18.4 Japanese yen 

0.0903 pound sterling
Due to varying exchange rates, the
relative value of each currency varies
continuously and thus the value of the
SDR fluctuates

The IMF fixes daily the value of one SDR

in terms of US dollars based on the
exchange rates of the constituent
currencies
 allocation

A nation's IMF quota, the maximum

amount of financial resources that it is
obligated to contribute to the fund,
determines its allotment of SDRs
 Interest rate
The SDR interest rate is determined weekly
and is based on a weighted average of
representative interest rates on short-term
debt in the money markets of the SDR
basket currencies. 

0.43%
EURO
 official currency of the euro zone

Austria, Belgium, Cyprus, Estonia, Finland, 
France, Germany, Greece, Ireland, Italy, 
Luxembourg, Malta,
the Netherlands, Portugal, Slovakia, Slovenia 
and Spain.
•  The
currency is also used in a further 5
European countries
Montenegro, Andorra, Monaco,
 San Marino and Vatican

• The euro is the second largest reserve

currency as well as the second most
traded currency in the world after
the U.S. dollar
The name euro was officially adopted on 16
December 1995. 
was introduced to world financial markets as
an accounting currency on 1 January 1999,
replacing the former European Currency
Unit (ECU) at a ratio of 1:1.
Euro coins and banknotes entered circulation
on 1 January 2002.
The euro is managed
and administered by
the Frankfurt-
based European Central
Bank (ECB)

authority to
set monetary policy
• 1 euro is divided
into 100 cents

The coins are issued

in €2, €1, 50c, 20c, 1
0c, 5c, 2c, and 1c
 Notes are issued
in €500, €200, €100, €50, €20, €10, €5.
Each banknote has its own color and is dedicated
to an artistic period of European architecture.
The front of the note features windows or
gateways while the back has bridges
Currency sign
• June 2010, with more than €800 billion in
circulation,
the euro has the highest combined value of
banknotes and coins in circulation in the
world, having surpassed the U.S. dollar

• IMF estimates of 2008 GDP
and PPP among the various currencies,
the euro zone is the second largest
economy in the world
 Transaction costs and risks
• Benefit of adopting a single currency is to
remove the cost of exchanging currency, i.e.
allowing businesses and individuals to
consummate previously unprofitable trades.

• For consumers, banks in the euro zone must

charge the same for intra-member cross-
border transactions as purely domestic
transactions for electronic payments .The
absence of distinct currencies also
removes exchange rate risks.
The risk of unanticipated exchange
rate movement has always added an
additional risk or uncertainty for
companies or individuals that invest
or trade outside their own currency
zones
 Trade
introduction of the euro is that it has
increased trade within the euro zone by
5% to 10%.
 INVESTMENT
• Studies have found a negative effect of
the introduction of the euro on
investment as of 2008 economic collapse

• Physical investment 5%
• FDI stocks 20%
 Exchange rate risk
reduction of the risk associated with
changes in currency exchange rates

Tourism
positive effect on tourism flows within the
EMU, with an increase of 6.5%.