By Aby Jose Koilparambil
May 27 (Reuters) - Most Asian currencies rose on Monday, underpinned by a softer dollar and after a warning from China's top banking regulator against betting on the yuan, whose stability is vital for its regional peers.
Although U.S.-China trade tensions remain the key driving theme for markets across assets, emerging Asian currencies started the week on a positive note as the dollar eased.
The greenback fell from a two-year high after orders for U.S.-made capital goods contracted in further evidence that manufacturing and the broader economy are slowing.
The weaker-than-expected data, a closely-watched proxy for business spending plans, drove the dollar lower and added to a fall which began Thursday following a report that showed manufacturing activity hit its lowest in almost a decade in May.
On Monday, the dollar index .DXY was trading slightly weaker.
Meanwhile, China's banking and insurance regulator said on Saturday it did not expect a persistent decline in the yuan CNY=CFXS, while adding that "those who speculate and short the yuan will for sure suffer heavy loss".
The yuan rose as much as 0.2% to its highest in nearly two weeks despite data on Monday showing profits for China's industrial firms shrank in April as slowing manufacturing activity halted the previous month's surge.
Sources had told Reuters China's central bank would use foreign exchange intervention and monetary policy tools to stop the yuan weakening past the key 7-per-dollar level in the near term.
"The weaker U.S. durable goods orders data was a negative for the dollar, which was helping the Asian currencies," said Chang Wei Liang, forex strategist at Mizuho Bank.
Chang added that the Chinese authorities did not want the weakness in the yuan to continue and if the unit's stability is anchored by policymakers, that would see more strength in Asian currencies.
The yuan has lost more than 2.3% against the dollar since the festering China-U.S. trade dispute intensified earlier this month.
The South Korean won KRW=KFTC was one among the major gainers on the day, appreciating as much as 0.5% to touch a two-week peak.
South Korean finance ministry and central bank officials too had issued verbal warnings last week against disorderly currency market movements as the won weakened to a 2-1/2-year low against the dollar.
The Indian rupee INR=IN extended gains for a second straight session, strengthening as much as 0.2% to its firmest in nearly three weeks, after Prime Minister Narendra Modi's ruling party retained power with a massive mandate in the general elections.
The Taiwan dollar TWD=TP and the Thai baht THB=TH put on up to 0.3%, while the Indonesian rupiah IDR=ID and the Malaysian ringgit MYR=MY gained slightly.
Bucking the trend, the Philippine peso PHP= weakened as much as 0.3% to 52.220 against the dollar.
The following table shows rates for Asian currencies against the dollar at 0511 GMT.
CURRENCIES VS U.S. DOLLAR
Change so far in 2019
(Reporting by Aby Jose Koilparambil in Bengaluru Editing by Jacqueline Wong)
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