THE PESO could trade sideways against the dollar this week as the market continues to watch for developments in the United States’ trade talks with China and other trading partners.

The local unit closed at P55.635 per dollar on Friday, strengthening by 11.1 centavos from its P55.746 finish on Thursday, Bankers Association of the Philippines data showed.

However, week on week, the peso declined by 12.5 centavos from its P55.51-per-dollar close on May 9.

The peso climbed against the greenback on Friday following the softer-than-expected April US producer price index (PPI) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The dollar was weaker early on Friday due to the PPI report, supporting the peso’s rise, a trader likewise said in a phone interview, although there was some profit taking later in the session.

For this week, the trader said the market will continue to monitor the US’ ongoing trade talks amid a lack of leads.

The trader sees the peso moving between P55.50 and P55.90 per dollar this week, while Mr. Ricafort expects it to range from P55.40 to P55.90.

The dollar fell in tandem with US Treasury yields on Friday after downside surprises on US economic data this week cemented bets of more US Federal Reserve rate cuts this year.

The week started out with a mix of market tailwinds headlined by a US-China trade truce which propelled the dollar higher, though the euphoria soon fizzled out and left currencies trading sideways.

Most of the action in the foreign exchange market came from the dollar’s moves against the South Korean won, where it fell sharply for a second straight day on news that Washington and Seoul discussed the dollar/won market earlier this month.

The moves were reminiscent of a similar episode in the Taiwan dollar earlier this month.

The dollar last traded 0.4% lower at 1,390 won.

In the broader market, the dollar was struggling to regain its footing after an overnight slide following data which showed US producer prices unexpectedly fell in April.

The PPI figures came on the heels of a tame consumer price reading earlier in the week, cementing bets that the Fed is likely to cut rates at least twice this year.

The euro was up 0.26% to $1.2130 while sterling rose 0.14% to $1.3325.

Against a basket of currencies, the dollar fell 0.2% to 100.57, though was on track for a slight weekly gain thanks to its sharp 1.3% rise on Monday.

Markets are now pricing in roughly 57 basis points (bps) worth of Fed cuts by December following Thursday’s data, up from 49 bps previously.

In a closely watched speech on Thursday, Fed Chair Jerome H. Powell said policymakers feel they need to reconsider the key elements around both jobs and inflation in their current approach to monetary policy. — Aaron Michael C. Sy with Reuters