* Malaysia bourse at more than 2-week high * Thai baht heads for half percent weekly drop * Malaysia"s ringgit, South Korea"s won set to post weekly gain By Sameer Manekar April 9 (Reuters) - Malaysian shares were driven higher on Friday by a mega local merger of telecom giants Axiata and Telenor, while Asia"s emerging currencies inched ahead as the dollar hovered near a two-week low and U.S. bond yields retreated further. The Thai baht firmed 0.1% in line with the region"s currencies that were flat to slightly higher, with the dollar headed for its worst week of the year after a bumper March and U.S 10-year Treasuries hovering around a around two-week low. The retreat in U.S. yields provided further respite to Asia"s risk-sensitive currencies. An unexpected rise in weekly U.S. jobless claims signalled an uneven recovery in the labour market. Comments by U.S. Federal Reserve Chair Jerome Powell about managing any temporary increases in inflationary pressures without removing monetary policy accommodation, especially given weak labour market conditions, supported Treasuries, said Venkateswaran Lavanya, analyst at Mizuho Bank. Over the week, Asian currencies were broadly mixed, with the Singapore dollar and South Korean won set to log decent gains, while the Thai baht and Indian rupee were on track to lose. The rupee ended Thursday at a five-month low. South Korea"s won, a beneficiary of improving global trade, was set to strengthen nearly one percent over the week, while the Thai baht was headed for a half percent drop. Meanwhile, Thailand"s central bank said the country may expand less than forecast this year after a new wave of coronavirus infections. An official added that the baht, despite recent weakness, will be volatile. Equities in Malaysia and Thailand were the gainers among emerging Asian markets, with both the benchmarks advancing as much as 0.8% each. "Risk assets found support as Fed speaks overnight underscored Fed"s commitment to its dovish and patience stance," analysts at Maybank FX Research & Strategy said. In Malaysia, a deal between telecom firm Axiata Group and Norway"s Telenor ASA to combine their local mobile operations sent shares of Axiata and Telenor"s local arm Digi.com soaring. Axiata jumped as much as 9.7% to its 13-month high level, while Digi.com surged 17.3% to a near nine-month peak. Shares in Jakarta were set for a fourth consecutive session of gains, advancing up to 0.7% on Friday to their highest since March 30. HIGHLIGHTS: ** Indonesian 10-year benchmark yields fall 3.7 basis points to 6.427% ** Indonesia in talks with China to secure as many as 100 million COVID-19 vaccine doses Asia stock indexes and currencies at 0338 GMT COUNTRY FX RIC FX FX INDEX STOCKS STOCKS DAILY % YTD % DAILY % YTD % Japan -0.04 -5.53 0.37 8.66 China -0.02 -0.38 -0.80 -0.53 India +0.00 -2.04 0.00 6.38 Indonesia +0.00 -3.37 0.55 2.11 Malaysia +0.05 -2.76 0.54 -0.99 Philippines - -1.19 - -8.33 S.Korea -0.05 -2.83 -0.22 9.14 Singapore +0.07 -1.39 -0.19 11.84 Taiwan +0.04 +0.23 -0.31 14.53 Thailand +0.10 -4.68 0.67 8.27 (Reporting by Sameer Manekar in Bengaluru; Editing by Kim Coghill)