China revaluation wouldn't mean much for G-10

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• Renminbi appreciation in 2010 is widely expected and well understood for its EM Asia implications. The impact on G-10 currencies, however, is often exaggerated.
• CNY appreciation could influence G-10 FX through two channels: stronger trade balances and less reserve diversification.
• Trade exposure favors JPY, AUD and CHF, but since EM Asia’s links are three to five times larger than these countries’, G-10 remains a poor proxy for CNY appreciation.
• Reserve diversification renders the euro most vulnerable to a revaluation, but only if a stronger yuan reduced China’s reserve build-up.

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