Analysts are saying the dollar’s role as a reserve currency won’t be threatened by a nine-fold expansion in the International Monetary Fund’s (IMF) unit of account, called Special Drawing Rights (SDRs). The increase in SDRs will allow developing nations to tap IMF money without having to accept policy changes often demanded as a condition of aid.

Leaders at the G20 summit meeting yesterday gave approval for the IMF to raise $250 billion by issuing SDRs, the artificial currency that the IMF uses to settle accounts among its member nations. SDRs were created by the IMF in 1969 to support the Bretton Woods exchange-rate system that collapsed in 1971. They act as a unit of account rather than a currency. The value of SDRs is based on a basket including the dollar, the euro, the Japanese yen and the British pound. There are now 21.4 billion SDRs ($32 billion) outstanding, according to the IMF.

“What the SDR discussions mean is that we could see the IMF being put in a position where it could raise in the capital markets funds in SDR-denominated debt,” said Hans-Guenter Redeker, the global head of currency strategy at BNP Paribas. The debt could be used “by China and other central banks to be put into their currency reserves, at the expense of the U.S. dollar.”

People’s Bank of China Governor Zhou Xiaochuan wrote last week that SDRs should be accepted in international trade and investment so they can be used as a reserve currency. The nation’s currency reserves, the world’s biggest, totaled $1.95 trillion at the end of 2008.

He also proposed more currencies be added to the SDR basket. The current weighting is: 44 percent for the dollar, 34 percent for the euro and 11 percent each for the yen and the pound. It doesn’t include the yuan.

“What the SDR discussions mean is that we could see the IMF being put in a position where it could raise in the capital markets funds in SDR-denominated debt,” Redeker said. The debt could be used “by China and other central banks to be put into their currency reserves, at the expense of the U.S. dollar.”