Nov. 25 (Bloomberg) -- The Philippine peso fell, capping a fourth straight week of losses, after investors cut emerging- market assets as European leaders disagreed on how to fix the region’s debt crisis.
The currency traded at the weakest level in seven weeks as a government report showed today the trade deficit widened in September after a slump in exports. German Chancellor Angela Merkel rejected a common euro-area bond program and a larger role for the European Central Bank to help support indebted nations. Philippine government bonds fell as the central bank said inflation will likely remain on the upper end of its forecast this year, limiting prospect for rate cuts.
“The peso market is aware of the external risks and pricing in the developments in Europe,” said Emilio Neri, an economist in Manila at Bank of the Philippine Islands. “We are confident remittances will offset the trade deficit and provide some support for the currency going into the year end.”
The peso dropped 0.2 percent to 43.76 per dollar as of 10:30 a.m. in Manila, making this week’s 0.8 percent loss the biggest slide in more than two months. It reached 43.795, the lowest since Oct. 5.
Investors withdrew $2.7 billion from emerging-market equity funds in the week through Nov. 23, Citigroup Inc. said in a research note today, citing EPFR Global data, which earlier said $32 billion flowed out in the year to Nov. 16. EPFR also said outflows from developing-nation bond funds were $205 million, according to Barclays Capital.
The Philippines had a trade deficit of $1.24 billion in September after imports rose 11.7 percent in September from a year earlier, the statistics office said today. Exports slumped 27.4 percent that month, the most in more than two years, a separate report showed on Nov. 10.
While inflation is manageable, price gains this month is forecast to be between 4.5 percent and 5.4 percent due to higher costs induced by recent storms, central bank Governor Amando Tetangco said today. Inflation in 2011 may come in within its 3 percent to 5 percent target, he said.
Bangko Sentral ng Pilipinas will keep its overnight rate at 4.5 percent at its next policy meeting on Dec. 1, according to the median of five forecasts in a Bloomberg News survey. The rate has remained unchanged since May.
The yield on the government’s 9.125 percent security due September 2016 rose five basis points, or 0.05 percentage point, to 4.78 percent from a week ago, according to Tradition Financial Services. The yield was little changed today and has climbed eight basis points this month.
--Editors: Sandy Hendry, Ven Ram
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