THE PESO retreated for the second straight day on Tuesday after gains in the US stock market and amid signals of a likely pause in easing by the Bangko Sentral ng Pilipinas (BSP).

The local unit finished trading at P49.95 versus the dollar on Tuesday, shedding five centavos from its P49.90 close on Monday, data from the Bankers Association of the Philippines showed.

The peso opened the session at P49.85 per dollar, which was also its intraday best. Meanwhile, its weakest was at P50.01 against the greenback.

Dollars traded increased to $887.46 million on Tuesday from $651.3 million on Monday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s depreciation came after better sentiment for the dollar following gains in the US stock market.

“The peso exchange rate closed weaker after upward correction in the dollar versus currencies as US stock market posted new 3.5 month highs,” Mr. Ricafort said in a text message.

Reuters reported Nasdaq hit a record high close on Monday. It is the first among Wall Street’s three main indexes to bounce back from the market crash due to the crisis.

The Nasdaq climbed 44.7% from its March 23 bottom, driven by gains from rising technology and communication stocks.

The Dow and S&P 500 climbed as well backed by heightened expectations for a swift recovery from the downturns caused by the pandemic. The S&P 500 is still 4.5% below its record high close while the Dow is about 6.7% below.

On the other hand, a trader attributed the peso’s weakness to signals from the central bank about holding policy rates in the upcoming policy-setting meeting on June 25.

“The peso depreciated after BSP Governor [Benjamin E.] Diokno hinted at the possibility of keeping policy rates steady at this month’s monetary policy meeting,” the trader said in an e-mail.

Mr. Diokno said on Monday they may opt to pause so the central bank will have space to maneuver in case of a worse fallout from the pandemic.

The central bank chief said while inflation continues to ease, some commodity prices have started to see an uptick, including fuel and rice.

Benchmark interest rates are currently at record lows after the central bank shaved a total of 125 basis points this year to cushion the impact of the crisis on the economy.

This brought the key policy rate or the overnight reverse repurchase rate to 2.75%, while overnight lending and deposit rates were trimmed to 3.25% and 2.25%, respectively.

For today, Mr. Ricafort sees the peso moving around the P49.80 to P50.05 levels versus the dollar, while the trader expects it to range around the P49.85 to P50.05 band.

Meanwhile, most emerging Asian currencies gained further ground against the dollar on Tuesday as easing coronavirus restrictions in the region fuelled hopes for a quick economic recovery from a coronavirus-induced slump. — Luz Wendy T. Noble with Reuters