(Bloomberg) — A handful of emerging-market currencies have held onto gains versus the dollar this year. That list may shrink in the coming weeks as the highly contagious delta variant forms a new fault line for developing nations.

Countries that are lagging in vaccination rates — such as South Africa and Russia — may feel the pressure as they tighten restrictions that will hurt economic activity, according to Credit Agricole CIB. Once the best performers of 2021, the rand and ruble were among those that knocked an index of emerging-market currencies lower in June for the first time in three months.

“Achievements in terms of vaccination will increasingly be a differentiation factor among emerging markets in the second half,” said Sebastien Barbe, head of emerging-market strategy at Credit Agricole. “The impact of the further spread of the virus variants will vary significantly depending on vaccination rates,” as well as economic and political factors, he added.

Both 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. It’s also wreaking havoc on their economies: tighter restrictions are pressuring a South African economy that’s reeling from its worst contraction in a century, while Colombia’s decision to shelve a plan to raise taxes earned it a rating cut to junk from Fitch Ratings.

The currencies of South Africa and Colombia are the most vulnerable as their central banks aren’t hiking rates “to build up a real rate cushion” against the U.S., according to Ed Al-Hussainy, a senior interest-rate and currency analyst at Columbia Threadneedle Investments in New York. Adding to the pressure: the prospect of higher fiscal spending and risk of outflows after yield-hungry global investors flocked to the nations’ assets this year, he said.

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.

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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’s baht. Meantime, Indonesia’s rupiah fell to its weakest since April as the country imposed the strictest curbs yet on the economic centers of Java and Bali.

Deepening Divisions

Only a few developing nations — Chile, China, Israel, the UAE and the Central 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. 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.

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.

Economic data bears out the division: purchasing managers’ 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.

That may increase pressure on developing-nation central banks to remain accommodative, another negative for currencies as the Federal Reserve starts discussing the withdrawal of stimulus. And it could deepen the divide between emerging and developed markets. That’s already showing: a Bloomberg index of developed-market stocks has beaten its emerging-market counterpart by a factor of almost two since the start of the second quarter.

Even more industrialized nations, such as the U.K., are struggling to contain the virus, despite relatively tight restrictions and vaccine progress. So the latest surge in infections across many developing economies — in many cases not yet driven by the new strain — suggests that “outcomes could be far worse now,” Deutsche Bank AG said in a report.

“We are watching the resurgence of infection numbers closely,” said Witold Bahrke, a Copenhagen-based senior macro strategist at Nordea Investment. “It is one of the factors that leads us being underweight EM currencies, especially due to its potential impact on the EM-DM growth differential.”

Status Quo

Central bankers in Romania, Malaysia, Peru and Poland are all expected to keep borrowing costs at their current levels On Wednesday, Romanian policy makers will probably keep the nation’s benchmark rate at 1.25%. The leu has slumped 4.2% in 2021, lagging most regional peers.The following day, Malaysia’s central bank may hold its policy rate at a record-low 1.75%, maintaining an accommodative stance after the government announced a new fiscal package of 150 billion ringgit ($36 billion) last week. The ringgit has fallen more than 3% this year.Also on Thursday, Peruvian policy makers are expected to keep the country’s benchmark rate at a record low of 0.25%, but they might take a more cautious tone in their statement after a higher-than-expected inflation print last week, as well as domestic and external risks, according to Bloomberg Economics. The sol slid the third-most among emerging markets during the second quarter as a tight presidential election sparked investor anxiety.The same day, Poland’s monetary authority will probably maintain borrowing costs at 0.1%. The zloty has declined by 1.8% in 2021, rebounding in the past quarter.

Inflation Clues

Inflation data is due from Thailand on Monday, the Philippines on Tuesday and Taiwan on Wednesday. China will publish gauges of consumer and producer price inflation on Friday.China’s PPI might cool from a 13-month high of 9% in May due to slowing price gains for metal ore and coal, while CPI may quicken to 1.8% from 1.3% the prior month, according to Bloomberg Intelligence. The yuan is the top emerging Asia currency this year after Taiwan’s dollar.Taiwan will post foreign-reserves data on Monday, followed by China, Indonesia and Malaysia on Wednesday as well as Thailand on FridayTaiwan is due to report trade statistics for June on Wednesday, while the Philippines will publish its May trade figures on FridayTaiwan’s exports are forecast to have jumped 32.6% from a year earlier, according to a Bloomberg survey of economists, reflecting rising demand for semiconductorsBrazil and Mexico will report June inflation numbers on Thursday after a pick-up in price-growth led both of Latin America’s largest economies to raise interest rates. Traders will look for clues on further rate increases in Thursday’s minutes from Mexico’s June rate meeting, when policy makers unexpectedly hiked borrowing costs.Chile may report on Thursday that inflation accelerated last month after weeks of rising energy costs, according to a survey of analysts by Bloomberg. Inflation may even rise above the target range, adding to pressure on the central bank to begin tightening in the third quarter. Chile also reports trade figures for June on Wednesday.Brazil retail figures on Wednesday will probably show sales soared 17% in May from a year earlier, down from a whopping 24% the month before, as emergency cash handouts lift supermarket revenues.

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