IMF warns against rushing into future allocations of SDRs

Officials from the International Monetary Fund (IMF) praised the global lender’s allocation of the Special Drawing Rights (SDRs) while also cautioning against rushing into future allocations considering the current environment of higher interest rates and inflation, per Reuters.

The news cites a blog post from IMF Finance Director Bernard Lauwers and Strategy Chief Ceyla Pazarbasioglu to highlight the fears about not-so-easy lending practices in the future.

"While an SDR allocation is a very useful and important mechanism to build confidence and strengthen global economic and financial resilience, it is not a silver bullet," the heads of the IMF's finance and strategy departments wrote in a new blog released alongside a full report on the issue said Reuters.

The news also cites the IMF’s close to $1 trillion in SDRs allocated to date as an alarm for being cautious while praising the latest, as well as the largest, tranche of relief package of around $650 billion to battle COVID.

Market implications

The news challenges the future money flow from the global lender and prods the risk-on mood, which in turn could be cited as a catalyst for the latest inaction of the AUD/USD pair, a risk barometer. That said, the Aussie pair rallied the most in a week the previous day before recently making rounds to 0.6480.

Also read: AUD/USD bulls cheer softer US data to approach 0.6500, Australia inflation eyed