Final answer:
In July 1974, the value of the SDR became a weighted average of the exchange rates of the currencies of 16 member countries. This followed the U.S. halting its gold convertibility and the ensuing collapse of the Bretton Woods system, shifting the international financial markets away from gold-backed currencies to trust-based value.
Step-by-step explanation:
In July 1974, following the U.S. decision to no longer convert its dollar into a specified amount of gold and to allow the market to determine its value in terms of gold and other currencies, the value of the SDR became a weighted average of the exchange rates of the currencies of 16 member countries. The move to differentiate from gold was a significant shift from a system where currencies were once backed by the precious metal to one where they were valued according to the international financial markets, essentially based on trust and perceived value. This was part of a broader transition in international finance, away from the gold standard which had been established post-World War II.
The Special Drawing Rights (SDR) created by the IMF in 1969, were units of account designed to supplement the existing reserves of member countries and reduce dependence on gold and the U.S. dollar. Initially, USD 3.5 billion in SDRs were issued to provide additional liquidity to the monetary system.
devaluing the currency, the Bretton Woods system effectively came to an end. Consequently, in the years following, the role of gold in the international monetary system was significantly reduced, and by 1974, the value of the SDR was recalculated to reflect a basket of currencies rather than a fixed amount of gold.