Sept. 29 (Bloomberg) -- The Philippine peso retreated from a one-week high on concern Europe’s failure to resolve its debt crisis will weaken global expansion and damp demand for emerging-market assets.
The currency was headed for its worst monthly loss since May 2010 before Italy sells bonds and German lawmakers vote to expand a European bailout fund today. Philippine bonds gained after the government said its budget deficit this year will likely be less than estimated.
“Clearly the sentiment is overall risk reduction,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila. “Investors are recalibrating their portfolios and cutting their positions in emerging-markets. There’s still a lot of risk in Europe which may translate to weaker growth across the world.”
The peso fell 0.4 percent to 43.625 per dollar as of the 4 p.m. close in Manila, contributing to a 3.1 percent decline for the month, according to Tullett Prebon Plc. The currency touched 43.445 yesterday, the strongest level since Sept. 21.
The local currency remains broadly competitive, central bank Governor Amando Tetangco said yesterday in Tokyo, adding that capital flows out of Asia are likely to prove temporary.
The yield on the government’s 5.875 percent bonds due January 2018 fell five basis points, or 0.05 percentage point, to 5.15 percent, according to Tradition Financial Services.
The budget deficit may be less than the official forecast of about 300 billion pesos ($6.9 billion), according to Transportation and Communications Secretary Mar Roxas, who is also a senior member of the government’s economic team. He spoke today in Manila.
The government had a budget surplus of 9.22 billion pesos last month, narrowing its eight-month deficit to 34.5 billion pesos.
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