THE PESO rebounded slightly on Tuesday as the dollar remained under pressure following the downgrade of the US’ credit rating.

The local unit closed at P55.63 per dollar, strengthening by four centavos from its P55.67 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session weaker at P55.73 against the dollar, which was also its worst showing. Its intraday best was at P55.57 versus the greenback.

Dollars exchanged rose to $1.999 billion on Tuesday from $1.41 billion on Monday.

The peso rose “on mounting concerns over the US economy, still following Moody’s credit rating downgrade,” a trader said in a phone interview.

The downgrade caused the dollar to weaken against most currencies, which also supported the local unit’s recovery, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Wednesday, the trader expects the peso to move between P55.50 and P55.80 per dollar on Tuesday, while Mr. Ricafort said it could range from P55.55 to P55.75.

The dollar traded sideways on Tuesday after declining for a week, hemmed in by the US Federal Reserve’s caution over the economy and as US lawmakers came closer to passing a bill expected to widen the nation’s fiscal deficit, Reuters reported.

The greenback sold off broadly on Monday following last week’s downgrade of the US sovereign rating by Moody’s on deficit concerns. Now attention turns to a critical vote in Washington over US President Donald J. Trump’s sweeping tax cuts.

Mr. Trump was expected to join the congressional debate over his tax bill on Tuesday. The vote comes after Moody’s stripped the US government of its top-tier credit rating, citing concerns over the nation’s growing $36.2-trillion debt pile.

Mr. Trump’s bill would add $3 trillion to $5 trillion to the debt, according to nonpartisan analysts. Ballooning fiscal debt, trade frictions, and weakened confidence about enduring US exceptionalism have weighed on US assets. The US dollar index has tumbled as much as 10.6% from its January highs, one of the sharpest retreats for a three-month period.

The dollar got a breather after Mr. Trump paused many of the largest tariffs he announced last month. But comments from Japan’s top trade envoy on Tuesday that Tokyo was firm in its anti-tariff stance pointed to no easy off-ramp in the negotiations in the weeks and months ahead.

And in the wake of Mr Trump’s tariff turmoil, Britain on Monday agreed to the most significant reset of defense and trade ties with the European Union since Brexit.

The greenback was little changed at 144.75 yen after touching 144.66 on Monday that was the weakest since May 8. The dollar index slid 0.1% after losing 0.6% in the previous session. — A.M.C. Sy with Reuters