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Philippine Peso Gains on Europe Optimism; Bonds Rise on GDP Data

The Philippine peso rebounded from a seven-week low as speculation European leaders will take steps to contain the region’s debt crisis before a summit next month boosted sentiment toward emerging-market assets.

European Union leaders are to meet on Dec. 9 to decide on expanding the European Financial Stability Facility. The currency snapped a three-day drop after retail sales in the U.S. over the Thanksgiving weekend surged 16 percent to a record. Philippine bonds rose as government data showed the economy expanded less than economists had forecast in the third quarter.

“The dominant factors on peso and Asian currencies are action or inaction taken on the E.U. debt crisis,” ING Group NV economist in Manila Joey Cuyegkeng wrote in a research note today.

The peso strengthened 0.4 percent to 43.78 per dollar as of 4:24 p.m. in Manila, according to Tullett Prebon Plc. The currency touched 43.965 earlier, the weakest level since Oct. 5. The peso will reach 42.85 by year end, according to ING.

Gross domestic product rose 3.2 percent in the three months through September from a year earlier, compared with a revised increase of 3.1 percent in the prior quarter, statistics office data showed today. The median forecast of economists in a Bloomberg survey was for growth of 4.1 percent.

“The GDP data is a bit disappointing,” said Katrina Ell, a Sydney-based economist at Moody’s Analytics Australia Pty Ltd. “If the economy worsens, it will increase the chances of rate cuts and put the peso on a weakening bias.”

Bids Rejected

President Benigno Aquino unveiled a $1.7 billion stimulus package last month to spur growth as exports tumbled by the most in more than two years in September. The central bank will hold its overnight rate at 4.50 percent when it meets on Dec. 1, according to 12 of 14 economists in a Bloomberg survey. The rest predicted a 25-basis point cut.

Government bonds rose as the central bank said it will consider the economic outlook during the monetary-policy review.

The yield on the government’s 8 percent bonds due July 2031 decreased four basis points, or 0.04 percentage point, to 6.79 percent, according to Tradition Financial Services.

The treasury rejected all bids at an auction of three- to 12-month bills today. It won’t allow “big adjustments” in rates as it may affect the value of assets, Finance Undersecretary Gil Beltran told reporters.

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