THE PESO may strengthen this week as it continues to be supported by the country’s strong economic fundamentals and as investors anticipate a gradual lifting of the lockdown in the country’s capital.

The local unit closed at P50.42 to the dollar on Friday, strengthening by 14 centavos from its Thursday finish of P50.56, according to data from the Bankers Association of the Philippines.

However, the local unit shed two centavos from its P50.40 close on April 30.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso rose after signals of a pause in easing from the central bank.

“The peso closed stronger after BSP (Bangko Sentral ng Pilipinas) Governor (Benjamin E. Diokno) signalled a possible pause in policy rate cuts,” Mr. Ricafort said in a text message.

On Thursday, Mr. Diokno said the 125 basis points (bps) in cumulative rate cuts for this year are “appropriate to provide support to the economy and boost market confidence” amid a manageable inflation environment.

The overnight reverse repurchase, lending, and deposit rates stand at 2.75%, 3.25% and 2.25%, respectively.

“The peso was also stronger after developments on the US-China trade talks,” Mr. Ricafort added.

Reuters reported that Chinese Vice Premier Liu He, US Treasury Secretary Steven Mnuchin and United States Trade Representative Robert Lighthizer held a phone call late on Thursday in which they spoke about US-China trade, the US government said in a statement.

The talk included the phase one agreement between the two countries signed earlier this year, the statement by the US Treasury Department and Trade Representative’s office after the call said.

The two sides agreed there was “good progress” made to meet the phase one agreement and that they expect to meet the obligations under the deal, it said.

Under the deal, China agreed to expand its purchases of US goods from a 2017 baseline by $200 billion over two years, with about $77 billion in increased purchases in the first year and $123 billion in the second year.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the peso continues to be fueled by the country’s financial buffers that could help it weather the economic fallout from the virus.

“The market has been pricing in the Philippines’ financial strength and it has been evident in returns from currency trading,” Mr. Asuncion said in a text message.

A major factor this week that may have an impact on currency trading is the government’s decision on the implementation of the enhanced community quarantine (ECQ) which raises hopes of a gradual reopening of the economy, Mr. Ricafort said.

“Major leads this week include possible easing of the lockdown after May 15, which could be decided anytime soon,” he said.

Presidential Spokesman Harry L. Roque, Jr. said on Saturday some areas in Metro Manila will continue to be under ECQ after the scheduled end of the lockdown in the region on May 15. He said the assessment on the lifting of the ECQ and the transition to general community quarantine of cities will be dependent on cases within the vicinity of the area.

Metro Manila has been under lockdown for nearly two months to prevent the spread of the virus.

Meanwhile, Mr. Asuncion said the country’s strong financial buffers will continue to back the peso this week.

“That gives you an idea of the underlying strength of the peso and how the Philippines will fly during this pandemic. It may be difficult but the finances seem to be holding up.

For this week, Mr. Asuncion gave a forecast range of P50.40 to P50.60 while Mr. Ricafort sees the peso moving around the P50.25 to P50.65 levels. — L.W.T. Noble with Reuters