EMERGING MARKETS-Thai baht drops for 4th week as Asian FX feels Delta variant heat

By Anushka Trivedi

July 9(Reuters) – The Thai baht was headed towards its fourth weekly loss on Friday as confidence in the country’s tourism-reliant economy waned amid a rapidly spreading Delta variant of coronavirus in Asia and abroad that has clouded global growth outlook.

South Korea’s won KRW=KFTC fell 0.4% to end lower for a third day after Seoul was put under the tightest coronavirus curbs, while Indonesian rupiah IDR= and the Singapore dollar SGD= eased 0.2% each.

The baht THB=TH, Asia’s worst performing currency this year, dropped 0.7% to 32.68 per dollar ahead of Prime Minister Prayuth Chan-ocha’s decision on imposing more travel restrictions. The baht last traded at this level during the COVID-19 outbreak in April 2020.

All regional currencies weakened after the U.S. Federal Reserve’s hawkish shift in tone at the June meeting but the baht suffered the most as strict curbs whacked consumption and the tourism industry, which accounts for 12% of gross domestic product (GDP) of the country.

“The baht’s Achilles heel is decimated tourism,” HSBC analysts said in a note, expecting it to weaken further amid slow recovery as they lowered their year-end projection for the currency by about 7% to 33.0 per dollar.

Investor sentiment had also taken a hit since the Bank of Thailand slashed its growth forecast for the economy last month, predicting it would return to pre-pandemic levels only by 2023.

Asia’s emerging markets already faced pressure from recent devastating outbreaks and a slow pace of vaccination, but a jump in COVID-19 cases in developed economies has stoked worries of more lockdowns that could hinder global trade.

“Broad risk aversion was even more apparent in the foreign exchange space with U.S. dollar on the rise… regional (Asian) currencies took the brunt because of worsening COVID outbreaks here,” Maybank analysts said in a note.

“The trigger could be the state of emergency declared for Tokyo on Thursday, underscoring the challenges of overcoming the Delta variant.”

Most Asian equities fell in line with the frail market sentiment, with the Philippine stock index .PSI leading declines, tumbling as much as 2.6% to see its worst day since March 19.

South Korean stocks .KS11 shed 1.1%, marking their worst week since February-end, while Taiwan .TWII and India shares .NSEI shaved off 1.2% and 0.4%, respectively.

HIGHLIGHTS

** South Korea reported 1,316 new COVID-19 infections, its second consecutive daily record

** Indonesian 10-year benchmark yields ID10YT=RR were up about 4.1 basis points at 6.572%

** In the Philippines, top index losers are Jollibee Foods Corp JFC.PS down 3.4% and LT Group Inc LTG.PS down 3.2%

Asia stock indexes and currencies at 0639 GMT

COUNTRY

FX RIC

FX DAILY %

FX YTD %

INDEX

STOCKS DAILY %

STOCKS YTD %

Japan

JPY=

-0.28

-6.23

.N225

-0.63

1.81

China

CNY=CFXS

+0.05

+0.62

.SSEC

0.00

1.51

India

INR=IN

+0.10

-2.10

.NSEI

-0.31

12.14

Indonesia

IDR=

-0.17

-3.47

.JKSE

0.12

1.14

Malaysia

MYR=

-0.14

-3.97

.KLSE

0.57

-6.75

Philippines

PHP=

+0.30

-4.10

.PSI

-1.30

-4.27

S.Korea

KRW=KFTC

-0.36

-5.47

.KS11

-1.07

11.99

Singapore

SGD=

-0.18

-2.50

.STI

0.59

9.92

Taiwan

TWD=TP

-0.17

+1.43

.TWII

-1.15

19.88

Thailand

THB=TH

-0.73

-8.38

.SETI

0.07

6.59

Graphic: World FX rateshttps://tmsnrt.rs/2RBWI5E

Asian currencies over 4 wkshttps://tmsnrt.rs/3hs0zSn

(Reporting by Anushka Trivedi in Bengaluru; Additional reporting by Tom Westbrook; Editing by Shailesh Kuber)

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