Oct. 18 (Bloomberg) -- The Philippine peso dropped as investors cut holdings of emerging-market stocks on concern European leaders will be unable to resolve the region’s debt crisis by as early as next week.
The currency retreated from a one-month high as data showed China’s economic growth trailed forecasts and the MSCI Asia- Pacific Index of shares fell by the most in two weeks. German Chancellor Angela Merkel’s office signaled yesterday that a solution to the debt turmoil may not be reached by the Oct. 23 European Union summit, which was set as a deadline by officials from the Group of 20 nations. Philippine bonds declined.
“It’s difficult for the peso to strengthen from here without any concrete rescue plan in Europe and there may be disappointment after the EU summit,” said Shigeo Zenki, head of the treasury department at Bank of Tokyo-Mitsubishi UFJ Ltd. in Manila.
The peso weakened 0.4 percent to 43.280 per dollar in Manila, according to Tullett Prebon Plc. The currency reached 43.115 yesterday, the strongest level since Sept. 14.
Finance chiefs from the G-20 had endorsed parts of a plan to contain Europe’s debt situation in Paris over the weekend. Germany said the time needed to resolve the issues will extend into 2012.
China’s economy grew 9.1 percent last quarter from a year earlier, versus 9.5 percent in the previous three months. Economists surveyed by Bloomberg had forecast a 9.3 percent expansion. China including Hong Kong was the Philippines’ biggest export market in 2010, according to government data.
The Philippines Bureau of the Treasury rejected all bids for 91-day and 182-day bills at an auction today to prevent borrowing costs from rising.
The Philippines will still consider fundraising and debt management options even after selling about 110 billion pesos ($2.5 billion) of 10- and 15-year bonds targeted at individuals, Treasurer Roberto Tan said today.
The yield on the government’s 6.375 percent bonds due January 2022 climbed 15 basis points, or 0.15 percentage point, to 5.95 percent, according to Tradition Financial Services.
Bangko Sentral ng Pilipinas will keep its benchmark rate at 4.5 percent at its Oct. 20 meeting, according to all 17 economists surveyed by Bloomberg. Monetary-policy settings are appropriate and there is no compelling reason for a shift, Governor Amando Tetangco said on Oct. 15.
--With assistance from Clarissa Batino in Manila. Editors: Andrew Janes, Simon Harvey
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