THE peso fell and bonds rose after the central bank signaled there’s room for Asian central banks to ease monetary policy and data showed the nation’s budget deficit narrowed in the first nine months of the year.

Asia has scope to cut interest rates and boost spending as consumer-price gains slow, central bank Gov. Amando Tetangco said in a speech Tuesday in Manila. The nine-month deficit was P52.99 billion ($1.2 billion), or about 20 percent of the level a year earlier, the government reported Tuesday after investors increased bids at a treasury debt auction.     

“The outlook for easing inflation gives the central bank the flexibility to keep the benchmark rate at least steady through 2012,” said Dave Estacio, chief fixed-income dealer at First Metro Investment Corp. in Manila. “The 25-year auction showed strong appetite for long-term notes and the budget report supported the momentum.”     

The yield on the 8 percent securities due July 2031 fell seven basis points, or 0.07 percentage point, to 6.92 percent as of 4:19 p.m. in Manila, the lowest level in two weeks, according to Tradition Financial Services. The peso dropped 0.2 percent to 43.205 per dollar, prices at Tullett Prebon Plc showed.     

Philippine inflation is manageable and monetary policy is supportive of economic growth, Tetangco said yesterday. The inflation outlook is “slightly tilted to the downside” and latest forecasts show the target of 3 percent to 5 percent until 2013 will be met, he said last week.     

Bangko Sentral ng Pilipinas kept its overnight borrowing rate at 4.5 percent on Oct. 20, as predicted by all 17 economists in a Bloomberg News survey. The final policy meeting for this year is scheduled for Dec. 1.    

The Bureau of the Treasury sold all the 9 billion pesos of 7.625 percent 2036 notes on offer Tuesday, fetching bids for almost three times that amount. The average yield was 7.131 percent, compared with 7.51 percent when the securities were first issued last month.      The government will report October inflation on Nov. 4. 

Asian currencies fell, led by South Korea’s won, as investors spurned higher-yielding emerging- market assets on concern European leaders will be unable to agree how to fix their debt crisis at a summit Wednesday.      While heads of state will meet as planned, a European Union finance ministers’ meeting was canceled as the issue of how to recapitalize banks can’t be decided before other elements of the rescue package, a person familiar with the matter said. Chinese Premier Wen Jiabao said Tuesday his government may adjust policies to protect growth, an indication the pace of yuan appreciation may slow. Bloomberg News

 “Concern that Europe’s summit results may not meet expectations is growing ahead of the meeting,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Co. “Investors will refrain from taking strong positions.”     

The won dropped 0.3 percent to 1,132.45 per dollar as of the close of trade, according to data compiled by Bloomberg. The rupiah weakened 0.2 percent to 8,873. Taiwan’s dollar was little changed at NT$30.125.     

The rupiah slipped on speculation importers are boosting dollar purchases to pay month-end bills. Import growth accelerated to 32.1 percent in September from a year earlier after an increase of 23.7 percent the previous month, according to the median forecast of economists in a Bloomberg survey before official data due Nov. 1.

“Demand for dollars from importers typically grows toward the end of the month,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Indonesia’s imports are increasing, reflecting solid domestic demand, and so there will be more demand for dollars.”     

China’s yuan forwards reversed earlier losses to trade at 6.3880 on speculation policy makers will ease monetary policy to safeguard the economic expansion and allow more currency gains to curb rising consumer prices.    

“Officials have signaled intention to protect economic growth and that boosted investor confidence in the yuan,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest lender. “Besides, there’s still a need for China to tackle inflation with a stronger currency to lower import prices.”    

The Taiwan dollar snapped a two-day gain before a government report on Oct. 31 that will show the island’s gross domestic product increased 3.6 percent in the third quarter, the slowest pace in two years, according to the median estimate of economists surveyed by Bloomberg.      Elsewhere, Thailand’s baht climbed 0.2 percent to 30.80 per dollar. Onshore financial markets in Singapore, Malaysia and India are closed today for the Hindu Deepavali holiday.