THE PESO is likely to weaken this week as markets monitor ongoing tensions between the US and China as well as local developments including inflation and the virus spread.

The local unit finished closed at P50.61 to a dollar on Friday, appreciating by eight centavos from its P50.69 finish on Thursday, according to data from the Bankers Association of the Philippines.

It also strengthened by nine centavos week on week from its P50.70-per-dollar close last May 22.

A trader said the announcement of the easing of lockdown measures was a reprieve for market sentiment and to the peso despite the continued tensions between the US and China recently.

“The peso was the lone outperformer because the Philippines announced the transition of some areas to GCQ (general community quarantine) on Thursday night,” a trader said in a phone call.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said aside from the transition to GCQ, weak US data also boosted the peso.

“The peso closed stronger after weaker dollar recently versus global currencies after weak US economic data on durable goods and home sales,” Mr. Ricafort said in a text message.

For this week, the trader said market sentiment will be guided by developments related to the US-China trade tensions.

“Everything right now is fundamentally headline-driven,” the trader said, noting that US President Donald J. Trump’s statements will have an impact on currency trading in the following days.

Reuters reported that Mr. Trump said on Friday that his administration will start the process to remove the special treatment for Hong Kong, a retaliatory move after China’s plans to impose new security legislation in the special administrative region.

For his part, Mr. Ricafort said major catalysts for foreign exchange trading this week will be the trend of new virus infections in the country as well as inflation, among others.

A BusinessWorld poll of 17 economists yielded a median inflation estimate of 2.2% for May, with analysts citing the uptick in food prices and a modest rebound in oil prices.

This falls close to the lower end of the 1.9% to 2.7% estimate given by the central bank. It also compares to the 2.2% print in April and the 3.2% seen in May 2019.

The Philippine Statistics Authority will report May inflation data on June 5.

For this week, the trader expects the peso to trade between P50.40 to P50.90 versus the dollar, while Mr. Ricafort sees the local unit moving around the P50.40 to P50.85 levels. — L.W.T. Noble with Reuters