MANILA - The peso weakened to the key P50 level against the dollar on Thursday as investors braced for higher interest rates in the US and the government said it was watching the local currency "very closely."

The peso recovered marginally before closing at P49.98 to the dollar, from P49.86 on Wednesday, according to data from the Philippine Dealing System.

Finance Secretary Carlos Dominguez said the government was guarding against "abrupt changes" in the exchange rate.

"We are watching the currency movements very closely. We seem to be moving in the same direction as the other currencies," Dominguez said in a statement.

The dollar has rallied in recent weeks after prospects of faster inflation in the US under a Donald Trump presidency sparked a sell-off in bonds and boosted the dollar to 13-year highs.

• READ: Peso weakness in middle range of regional slump: Tetangco

Dominguez said the country's strong fundamentals would help it weather the impact of a weak peso, which would make imports more expensive.

The finance chief earlier said he preferred a "slightly weak" peso to boost the value of remittances from overseas Filipino workers.

The peso is "normalizing" in anticipation of a rate increase by the US Federal Reserve, said finance undersecretary Gil Beltran. Analysts expect the adjustment to happen by next month.

A rate increase by the Fed is expected to drive funds back to the US from emerging markets like the Philippines.