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Prospects Daily: Indian rupee and Thai baht lead depreciations against U.S. dollar among Emerging Asian currencies, UK house price inflation fastest since 2009, China’s non-Manufacturing Purchasing Managers’ Index dips in December

Financial Markets… The Indian rupee and Thai baht led depreciations versus the dollar in Emerging Asian currencies this week as weaker economic data prompted speculation that some of the region’s largest economies are cooling. A government report showed China’s manufacturing and service sector growth slumped in December, while an industry report showed India’s manufacturing Purchasing Manager’s Index weakened last month. The rupee fell 0.9% from last week to 62.405 per dollar, after dropping to a 1-month low earlier today. The baht dropped 0.5% this week to 33.013 per dollar amid escalating political turmoil, touching the weakest level since June 2010 yesterday. Elsewhere, the Philippines’ peso, South Korea’s won, Taiwan’s dollar, and Malaysia’s ringgit all depreciated against the dollar.
 
Spanish government bonds extended their gains on Friday, pushing the benchmark 10-year yields to the lowest levels since May 2010, as encouraging labor data added to signs the country’s economy is gaining momentum. Spain’s 10-year bond yields fell 8 basis points to 3.89% after sliding to a 3 ½ year low of 3.887% earlier. Italian’s 10-year yield also declined, falling as much as 4 bps to a 7-month low of 3.93%. Furthermore, the risk premium demanded by investors to hold Italian and Spanish 10-year bonds over comparable German bunds fell to below 200 bps for the first time since April 2011.
 
High Income Economies… With an increase in spending on private construction more than offsetting a drop in spending on public construction, U.S. construction spending rose 1.0% (m/m sa) to an annual rate of $934.4 billion in November from the revised October estimate of $925.1 billion.  Private construction spending rose 2.2% to an annual rate of $659.4 billion, while spending on public construction dropped by 1.8% to an annual rate of $275.0 billion in November.
 
U.K. house price growth accelerated more-than-expected in December and at the fastest pace in more than four years as supply failed to keep pace with the upturn in demand.  The monthly increase in house prices doubled to 1.4% (m/m) from 0.7% in November.  At the same time, mortgages granted for house purchases reached almost a six-year high in November.  Policy measures such as the Funding for Lending as well as the Help to Buy scheme helped to keep mortgage rates close to all-time lows and improve the availability of credit, especially for those with smaller deposits.
 
Developing Economies…East Asia and Pacific: China’s non-Manufacturing Purchasing Managers’ Index came in at 54.6, seasonally adjusted, in December according to a survey from the China Federation of Logistics and Purchasing. A score above 50 signals expansion.  The December reading was, however, down from 56.0 in November, indicating slower growth in the non-manufacturing sector.  The sub-index measuring services business activity fell to 52.5 from 54.1 in November, while the new orders index remained unchanged at 51.0. The intermediate input price index came in at 56.9, up from 54.8 in November.
 
Europe and Central Asia: Hungary’s unemployment rate fell to its lowest level in nearly five years in November, declining to 9.3% from 9.8% in October and September. The unemployment rate was at its lowest when it stood at 9.1% in February 2009.  The number of unemployed persons fell to 410,500 from 433,700 in October and from 467,500 a year ago. The youth unemployment rate fell for the third consecutive month to 24.7% in November, down from 26.8% in October. Meanwhile, the number of employed persons rose 2.2% (y/y) in the September-November period.
 
Turkey’s annual headline inflation, measured by the consumer price index, edged up to 7.4% in December from 7.3% in November driven by higher transportation and food prices.  Transportation costs rose 9.8% (y/y) while prices of food and non-alcoholic beverages grew 9.7% (y/y).  In addition, prices of alcoholic beverages and tobacco increased 10.5% (y/y) and costs of hotels, cafes and restaurants went up by 10.0% (y/y). Month-on-month, prices rose 0.5% in December.

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