THE PESO weakened against the dollar on Wednesday as Fitch Ratings penciled in a deeper contraction for the Philippine economy.

The local unit closed at P48.66 against the greenback on Wednesday, losing 10 centavos from its P48.56-per-dollar finish on Tuesday, data from the Bankers Association of the Philippines showed.

The peso opened Wednesday’s session at P48.63 per dollar. It climbed to as high as P48.585 but succumbed to weakness, closing at its weakest showing of P48.66 versus the greenback.

Dollars traded dropped to $584.90 million on Wednesday from Tuesday’s $687.37 million.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message the peso slid after Fitch cut its outlook for the Philippine economy.

Gross domestic product (GDP) is expected to shrink by 8% this year, the steepest projected decline among economies in Southeast Asia, Fitch said on Tuesday.

The credit rater’s latest forecast is worse than the -4% it penciled in last June and the -4.5 to -6.6% projected by the government. The economy already plunged into recession after GDP shrank by 16.5% in the second quarter.

Mr. Ricafort added there was a flight to safety as United Kingdom-based AstraZeneca Plc suspended the late-stage trial of its coronavirus disease 2019 (COVID-19) vaccine development after finding “unexplained illness” in a participant of its tests.

“AstraZeneca, which was putting on hold tests on its COVID-19 vaccine, also weighed on global market appetite for the dollar. Continued profit taking in the US stock markets partly led to the recent upward correction in the dollar,” Mr. Ricafort said.

A trader agreed, saying the dollar strengthened on safe-haven demand following Wall Street’s decline as US markets reopened on Tuesday.

“The dollar moved higher today as the sell-off in US stocks overnight drove safe demand for the foreign currency,” the trader said in an e-mail on Wednesday.

US stocks closed lower for a third straight session on Tuesday as heavyweight technology names extended their sell-off to send the Nasdaq into correction territory, while Tesla suffered its biggest daily percentage drop after the stock was passed over for inclusion in the S&P 500, Reuters reported.

The Dow Jones Industrial Average fell 632.42 points or 2.25% to 27,500.89; the S&P 500 lost 95.12 points or 2.78% to 3,331.84; and the Nasdaq Composite dropped 465.44 points or 4.11% to 10,847.69.

For today, Mr. Ricafort sees the peso moving from P48.60 to P48.75 against the dollar while the trader sees the local currency ranging from P48.50 to P48.80. — K.K.T. Jose with Reuters