* S. Korea stocks, won battered by virus surge * Thai baht slides to over 1-yr low as tighter curbs proposed * BNM holds rates steady as expected By Anushka Trivedi July 8 (Reuters) - Malaysian shares slumped and the ringgit hit a more than ten-month low on Thursday after the biggest political party of the country"s ruling coalition called for Prime Minister Muhyiddin Yassin to resign at a time when the country remains in a COVID-19 lockdown. Bank Negara Malaysia met for a policy review against this backdrop, and held interest rates at 1.75% as widely expected, but cautioned that growth faces a hurdle from the restrictions that have been in place since June. The Kuala Lumpur index widened its losses to 1.6% and the ringgit fell 0.4%. Both have been trading lower since United Malays National Organisation (UMNO) said it would pull its support from the coalition after months of infighting, citing the government"s failure to manage the pandemic effectively. It was unclear if Muhyiddin, who holds a slim majority, would be immediately unseated as the parliament is currently not in session. The situation is becoming "increasingly precarious" and another political vacuum, as was created by the sudden resignation of Mahathir Mohamad last year, will lead to more drawn out negotiations, Mizuho analysts wrote in a note. "Without a resolution to the political turmoil, COVID-19 could continue to cast its long shadow on the Malaysia"s economic recovery," the analysts said. Asian currencies dragged against a buoyant dollar after minutes of the U.S. Federal Reserve"s June policy meeting confirmed the world"s biggest central bank was mulling tapering its asset buying programme, which could be as soon as this year. Leading losses in the region, the South Korean won slid 0.7% to a four-month low on a record jump in COVID-19 infections in the country, with officials tightening curbs further. Local stock index tumbled 1%. The Indonesian rupiah and Singapore"s dollar dropped around 0.3% each, while the Thai baht weakened 0.6% to hit a more than one-year low. Thai stocks declined 2% after authorities proposed new restrictions in high-risk areas which would be considered at a meeting on Friday, after the country reported a daily record of 75 deaths. HIGHLIGHTS ** Indonesian 3-year benchmark yields are down 3.8 basis points at 4.67% ** Top losers on FTSE Bursa Malaysia Kl Index include Mr DIY Group M Bhd down 5.0% and Top Glove Corp down 4.9% ** Top losers on the Singapore STI include Venture Corp, down 2.2%, and Yangzijiang Shipbuilding Holdings Ltd, down 2.1% Asia stock indexes & currencies at 0740 GMT COUNTRY FX RIC FX DAILY FX YTD INDEX STOCKS DAILY % STOCKS YTD % % % Japan +0.62 -6.12 -0.88 2.46 China -0.14 +0.74 -0.79 1.51 India -0.15 -2.22 -0.74 12.73 Indonesia -0.34 -3.37 -0.16 0.93 Malaysia -0.36 -3.71 -1.51 -7.38 Philippines -0.12 -3.75 -0.26 -3.01 S.Korea -0.60 -5.14 -0.99 13.20 Singapore -0.23 -2.30 -1.00 9.37 Taiwan +0.00 +1.75 0.09 21.27 Thailand -0.59 -7.67 -2.03 6.57 (Reporting by Anushka Trivedi in Bengaluru; Editing by Amy Caren Daniel) Our Standards: The Thomson Reuters Trust Principles.