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<\/a><\/p>\nBoth the South African rand and Colombian peso are feeling the pain from a spike in Covid-19 cases, which is keeping expectations for tighter monetary policy at bay.<\/p>\n
The virus is also wreaking havoc on their economies: tighter restrictions are pressuring a South African economy that\u2019s reeling from its worst contraction in a century, while Colombia\u2019s decision to shelve a plan to raise taxes earned it a rating cut to junk from Fitch Ratings.<\/p>\n
The currencies of South Africa and Colombia are the most vulnerable as their central banks aren\u2019t hiking rates \u201cto build up a real rate cushion\u201d against the US, according to Ed Al-Hussainy, a senior interest-rate and currency analyst at Columbia Threadneedle Investments in New York.<\/p>\n
Adding to the pressure: the prospect of higher fiscal spending and risk of outflows after yield-hungry global investors flocked to the nations\u2019 assets this year, he said.<\/p>\n
In comparison, the Brazilian real and Mexican peso will be more resilient as their central banks tighten policy, he said. The real has outpaced all of its developing peers this year even as Covid-19 cases remain at record highs.<\/p>\n
The spread of the delta strain is also taking its toll on Southeast Asia. MUFG Bank Ltd. expects sluggish tourism revenue to weigh on Thailand\u2019s baht. Meantime, Indonesia\u2019s rupiah fell to its weakest since April as the country imposed the strictest curbs yet on the economic centers of Java and Bali.<\/p>\n
Deepening Divisions<\/h3>\n
Only a few developing nations – Chile, China, Israel, the UAE and the Central and Eastern European countries – have inoculated close to half of their populations, the level seen as needed to curb the spread of the delta variant, Bank of America Corp said in a report Friday.<\/p>\n
Most major emerging markets should get there by year-end, including Brazil, India, Indonesia, Mexico, Russia and Turkey, said David Hauner, head of cross-asset strategy at BofA.<\/p>\n
South Africa is the outlier, he said, with only about 5% of its population vaccinated. At the current rate, it would take until 2023 for the nation to reach 50%. In Colombia, only 11% of the population is fully vaccinated – a lower proportion than in Chile, Mexico and Brazil.<\/p>\n
Economic data bears out the division: purchasing managers\u2019 indexes in Russia and South Africa, along with those in Asian nations with relatively low vaccination rates, fell in June. Those in Eastern Europe and Latin America, where inoculation programs are more advanced, mostly rose.<\/p>\n