Governors of Central Banks

Central Bank Governors generally have PhDs.

1. People's Bank of China: Dr Zhou Xiaochuan. PhD from Tsinghua University

2. Reserve Bank of India: Dr Subbarao. PhD from Andhra University. He did his BSc. Physics from IIT Kharagpur in 1969, MSc. IIT Kanpur. He also has a Masters degree in Economics from Ohio State. He became Governor in September 2008.

3. Bank of England: Dr Mervyn King. Honorary Doctorate from Cambridge (now ex-Governor).

Biggest Yuan Fall since Dec08 following Xrate Reform

Speculation is fizzing around China amidst beliefs that its central bank (PBOC) will INTERVENE to limit gains of yuan against the dollar. China announced over the weekend that they would drop the 2 year peg (FIXING) of the yuan against the dollar, allowing the yuan to appreciate.

The Chinese consumer can now buy a bit more dollars than before.

If China becomes more consumer-oriented, then will inflation rise in the US, if cheap goods from China are no longer available. This sentiment was echoed by Michael Woofolk, MD at Bank of New York Mellon, who revealed that the higher cost of Chinese goods would lead to inflation and higher interest rates in Europe and the US, resulting in slower growth.

"This is an important step" said US Treasury Secretary, Tim Geithner. One of Obama's foreign policy goals is a stronger renminbi. The idea is that if Chinese good becomes more expensive, US consumers will buy more US goods.

Japanese Bonds and Equities This Week

JGB futures hit a record 2 year high (as people moved money from falling shares). JGBs have also been helped by the Eurozone debt crisis. 3 month LIBOR on YEN is currently around 0.24% (24 TV series) compared with 0.53% for USD 3m-Libor (easy to remember, 53 is the 16th prime number) - Yen LIBOR used to be more than USD. NKY is currently around 9700 level (fell a lot in May). GBP 3-month LIBOR is 73 bps (21st prime number).

Kerviel defended by Noriega's lawyer to take stand on Tuesday 8 June (mardi huit juin)

The trial of JK will take place in France's medieval Palais de Justice between Oliver Metzner defending JK and Jean Veil (son of politician Simone Veil and "le complice des puissants" or "the accomplice of the powerful") defending SocGen.

JK is blamed for 4.9 billion EUR of losses of SocGen by exposing the bank to 50 billion EUR notional of unhedged futures in January 2008 (loss of 10% of the notional). It was not only the exposure but the three day sale starting Jan 21 that resulting in the realised losses.

JK claims his bosses knew about his bets and that exceeding trading limits was normal. In defending JK, Metzner was quoted as saying: "When it is a case of a man against the system, I defend the man and not the system". Metzner has formerly defended General Noriega, the Panamanian dictator (1983-89 who was removed from power by the American invasion of Panama in 1989).