The continuation of the global currency war may cause the yuan to depreciate

As the central bank’s interest rate cuts dominate the headlines of major financial media, the accelerated global currency war has become increasingly worrying. Bank of America Merrill Lynch (bofa) pointed out that the continuation of the global currency war may cause the yuan to depreciate.
Claudio Piron and Cui Wei, strategists at Bank of America Merrill Lynch in Singapore, said at a press conference on Wednesday (March 25) that if the global currency war continues into the second half of 2015, the USD/CNY may rise before the end of the fourth quarter. Towards 6.36.
Bank of America expects USD/CNY to rise to 6.30 before the end of the second quarter this year and to 6.34 before the end of the third quarter.
Piron said that China may use the mild depreciation of the renminbi to stabilize inflation expectations. But China will resist the temptation to allow a one-time sharp depreciation of the yuan, which could lead to capital flight and create market turmoil.
Bank of America Merrill Lynch pointed out that since the third quarter of 2014, the real effective exchange rate of the RMB has risen faster than the U.S. dollar. The size of foreign currency borrowings by Chinese entities may have been around US$1.3 trillion in 2014, compared with only US$170 billion in 2011.
The Global Foreign Exchange Quotation Center showed that at 15:03 Beijing time, USD/CNY was trading at 6.2112/25.