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China revaluation wouldn't mean much for G-10
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.
Ends
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