Describe how the special drawing rights (SDR) are constructed. Also, discuss the situation under which the SDR was build.
SDR was created by the IMF in the year of 1970 as a new reserve asset, partially to alleviate the pressure on the U.S. dollar as the key reserve currency. It is a basket currency comprised of five major currencies, that means., U.S. dollar, Japanese yen, German mark, French franc, and British pound. At present, the dollar receives a 40% weight, mark 21%, franc 11%, yen 17% and pound 11%. The weights for distinct currencies tend to change over time, reflecting the relative significance of each currency in international trade & finance.