Where do you see this?

In recent news articles about currencies and the discussions at the G-20 summit of world leaders in London.

What does it mean?

SDRs, or Special Drawing Rights, refer to the artificial currency created by the International Monetary Fund (IMF) in 1969 to support the Bretton Woods fixed exchange rate system. SDRs are still used by the IMF for its accounts, and by some countries as a peg for their currencies. The SDR is made up of a basket of four currencies: the United States dollar, the euro, the yen and the pound.

Why is it important?

The financial crisis has catapulted SDRs into the limelight as a possible global currency to replace the US dollar, which is currently the world's de facto reserve currency. Most central banks hold their reserves in US dollars, but this dependence on the greenback is becoming an increasing source of concern for other countries. They feel that the dollar-based global economy allowed the US to live beyond its means and trigger the economic meltdown.

So you want to use the term. Just say...

'If China had its way, SDRs would replace the greenback and the euro as the world's reserve currency.'

Fiona Chan

This article was first published in The Straits Times.