I'm trying to understand function of a chord in Miguel Llobet's arrangement of Canço del Lladre. I marked my interpretation of the chords in the excerpt below. The chord symbols in parenthesis are signalized just by a single note, so they are not really played, they are rather the chords I would imagine there to be if I were to harmonize it (though I'm really unsure about G).
My question is about the chord C# in measure 5. It appears to me a dominant chord (I could easily extend it to C#7, or maybe even C#7b9). What is its harmonic function?
By ear I recognize a similarity to diminished common tone resolution, but the played chord is a C# triad, not a diminished one! Perhaps the spelling of F instead of E# is some hint, but I fail to recognize it.
The respective fragment can be found at 0:11 in this recording