China's Yuan has been added to the elite Reserve Currencies club at the International Monetary Fund (IMF).

The IMF also announced that the recalculation of its basket of major currencies.

The Yuan is the fifth most widely used currency in the world. The inclusion of the Yuan marks the first such adoption of a new currency since the Euro's addition to the IMF's basket in 1999. The move will help boost the demand for the Yuan in international transactions.

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The move will likely to bring more transparency to Chinese monetary system. The Yuan was devalued by the government in 2015. Since then the currency has touched its lowest levels in six years.

"Being part of the SDR basket at the IMF is quite a ways away from being a global reserve currency," US Treasury Secretary Jack Lew said. He also applauded China's efforts to make its currency more open.

With effect from Saturday, the Yuan will be the fifth member of the IMF's Special Drawing Rights (SDR) basket of currencies. Other currencies included in the basket are the US Dollar, British Pound, the Euro and Japanese Yen. The inclusion of the Yuan will not only increase the demand for the currency but will also position China as an important part of the global financial system.

According to South China Morning Post, Peter Wong Tung-shun, chief executive of the Asia-Pacific region for HSBC, said that the inclusion is an important step and will make the Yuan "a truly international currency."

The IMF's SDR was established in 1969. Its main purpose is to provide a boost to liquidity and trade. The reserve is also used for supplementing IMF member countries' official reserves during financial crisis.

TagsInternational Monetary Fund, yuan, us dollar, euro