Manila - Two government soldiers were wounded Thursday in clashes with Muslim separatist rebels in the southern Philippines, where hostilities have killed 102 people and displaced nearly 150,000 residents since last week.

The fighting occurred in Damatulan village in Midsayap town, North Cotabato province, 930 kilometres south of Manila, one of five towns occupied by Moro Islamic Liberation Front (MILF) rebels last week.

Troops encountered the MILF guerrillas and two were wounded as they pressed on with offensives against rebels who took over the towns in North Cotabato, said Major Armand Rico, a regional military spokesman.

The hostilities in the southern region of Mindanao have escalated since the signing of a controversial land deal between the MILF and the Philippine government was stopped by the Supreme Court over questions over the agreement's constitutionality.

The agreement on ancestral domain would have expanded an existing autonomous Muslim region on Mindanao, the Philippines' main southern island.

On Wednesday, the government announced it was canceling the agreement on ancestral domain because of strong opposition to it but vowed to renegotiate a new deal with the MILF.

President Gloria Macapagal Arroyo "is committed to peace," her deputy spokeswoman, Lorelei Fajardo, said Thursday. "The cancellation of the agreement on ancestral domain is a painful step in our collective effort to come to a new agreement with the MILF."

"She will seek a new agreement within the boundaries of law set within the constitution," Fajardo added.

But she stressed that Arroyo "will not allow adventurism by MILF forces to pressure the government to sign any agreement even if it is for peace."

The military has launched offensives against the MILF after a spate of attacks in the south since last week when hundreds of rebels occupied 15 villages in five towns in North Cotabato province and one town in Basilan province.

Fifty-three people, mostly MILF rebels, were killed in the fighting in North Cotabato and Basilan. More than 104,000 people were also forced to flee their homes at the height of the hostilities in North Cotabato, the Office of Civil Defence said.

Just days after government troops drove the guerrillas away from the occupied villages, separate groups of MILF rebels went on a rampage in the provinces of Lanao del Norte, Lanao del Sur and Sarangani.

Forty-nine people, mostly civilians, were killed in the attacks. More than 40,000 people were also displaced in Lanao del Norte, where the guerrillas burned homes, ransacked businesses and government buildings, and ambushed private vehicles. (dpa)