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SDR & EURO

PRESENTED BY :

ANKITA SHRIVASTAVASAKSHI PRAKASH

M.B.E. (SEM IV)

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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 itmay be exchanged in times of need

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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 aredenoted with the ISO 4217 currency

code XDR.

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VALUE Created 1969,1 SDR was value of

0.888671 grams of gold, the

value of $1 at that time.

After the breakdown ofthe Bretton Woods

system in the early 1970s,

the SDR was redefined in

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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

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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 theexchange rates of the constituent

currencies

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A nation's IMF quota, the maximumamount of financial resources that it is

obligated to contribute to the fund,

determines its allotment of SDRs

ALLOCATION

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INTEREST RATE

The SDR interest rate is determined weekly

and is based on a weighted average of

representative interest rates on short-termdebt in the money markets of the SDR

basket currencies.

0.43%

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EURO

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official currency of the euro zone

Austria, Belgium, Cyprus, Estonia, Finland,

France, Germany, Greece, Ireland, Italy,

Luxembourg, Malta,

the Netherlands, Portugal, Slovakia, Sloveniaand Spain.

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The currency is also used in a further 5

European countriesMontenegro, 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 afterthe U.S. dollar

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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.

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The euro is managed

and administered by

the Frankfurt-

based European Central

Bank (ECB)

authority toset monetary policy

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1 euro is divided

into 100 cents

The coins are issuedin 2, 1, 50c, 20c, 1

0c, 5c, 2c, and 1c

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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

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CURRENCY SIGN

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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

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TRANSACTION COSTS AND RISKS

Benefit of adopting a single currency is toremove 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 domestictransactions for electronic payments .The

absence of distinct currencies also

removes exchange rate risks.

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The risk of unanticipated exchange

rate movement has always added an

additional risk or uncertainty forcompanies or individuals that invest

or trade outside their own currency

zones

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introduction of the euro is that it has

increased trade within the euro zone by

5% to 10%.

TRADE

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INVESTMENT Studies have found a negative effect ofthe introduction of the euro oninvestment as of 2008 economic collapse

Physical investment 5%

I stoc s 20%

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EXCHANGE RATE RISK

reduction of the risk associated with

changes in currency exchange rates

TOURISMpositive effect on tourism flows within the

EMU, with an increase of6.5%.

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