THE PESO could depreciate versus the dollar this week on expectations of a wider trade deficit and ahead of the announcement of the restriction measures to be implemented for the second half of January.

The local unit ended trading at P51.35 per dollar on Friday, shedding 17 centavos from its P51.18 close on Thursday, based on data from the Bankers Association of the Philippines.

Week on week, it also weakened by 35.1 centavos from its P50.999-a-dollar finish on Dec. 31.

The peso declined versus the dollar as investors were cautious over the rapid rise in infections in the country, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Daily infections climbed by 21,819 on Friday, based on data from the Department of Health. On Saturday, infections jumped by 26,458 to bring the active case tally to 102,017.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said hawkish signals from the US Federal Reserve made market players opt for the safe-haven greenback, causing the peso to depreciate.

Minutes of the Federal Open Market Committee’s monetary policy meeting last month showed officials identified both elevated inflation and the “very tight” labor market to support their view of possibly increasing interest rates sooner rather than later, Reuters reported.

For this week, Mr. Asuncion said the market will factor in trade balance data, which will be reported by the Philippine Statistics Authority on Jan. 11, Tuesday.

Latest data showed the country’s trade deficit widened to $4.02 billion in October from the $4-billion shortfall in September as well as the $2.05-billion gap a year earlier. This, as exports rose by 2% year on year to $6.41 billion, while imports jumped by 25.1% to $10.43 billion.

The trade deficit in the first 10 months of 2021 ballooned to $33.21 billion from a $20-billion shortfall in the same period of 2020.

Mr. Ricafort said investors will also continue to watch out for the trend in infections and the decision on restriction measures that will be in place after Jan. 15.

Metro Manila, Bulacan, Cavite, Rizal, as well as other cities and provinces across the country experiencing an infection spike are under the tighter Alert Level 3 until Jan. 15 to curb the spread of the virus.

For this week, Mr. Asuncion gave a forecast range of P50.90 to P51.40, while Mr. Ricafort expects the local unit to move within P51 to P51.50 per dollar. — Luz Wendy T. Noble with Reuters