By Sujata Rao

LONDON, June 26 (Reuters) - Emerging stocks touched two-week highs on Monday thanks to strong gains across Asia, a one percent oil price rise and a flat dollar, while Chinese mainland shares were boosted by encouraging comments from index provider MSCI.

MSCI's emerging markets benchmark .MSCIEF rose 0.6 percent, lifted by Asia where Taiwan closed at 27-year highs .TWII and Hong Kong-listed Chinese shares rose 0.75 percent.

Chinese Shanghai- and Shenzen-listed shares were at 18-month highs after MSCI said it could add another 195 firms to its emerging markets index having this month given the green light to 222 stocks to join in a year's time.

On currency markets, the dollar remained pinned flat as markets have been pricing out another U.S. rate rise this year, given the run of soft economic data .DXY while the U.S. bond curve is at the flattest in a decade, with 10-year yields just off seven-month lows.

"People are still happy to buy EM assets and high yielders. We have well digested the Fed. Maybe there could be a question about inflation this week - we expect a decline in both Europe and the United States," said Guillaume Tresca, a strategist at Credit Agricole in Paris.

"We are trying to find a trigger for a sell off - such as bad inflation, the ECB, political risk - but all these factors are okay for now."

That backdrop has allowed emerging currencies to rally, with currencies ranging from the Korean won to the South African rand and the Turkish lira rising around 0.4 percent to the dollar. The rouble jumped 0.8 percent, rising off four-month lows hit during last week's oil price fall.

Gulf markets were shut for Eid but Qatari credit default swaps rose 4 basis points to the highest in a year after neighbouring states, which have imposed sanctions on the country, gave it 10 days to comply with an ultimatum.

Although world markets have remained sanguine, Morgan Stanley pointed out the possible fallout on oil prices.

"The Saudi Arabia-led group seems to have adopted an increasingly critical position against Iran which may soon lead to uncertainty about the size of regional energy exports should the conflict escalate further from here," the bank wrote.

Political risk may also flare in South Africa where investors are concerned about the threat to central bank independence.

"In the very short-term we are still positive on the rand, due to the carry. But we see a long-term depreciation due to the high political risk," Tresca said. "The central bank has always been a positive factor for ratings agencies and investors."

(Additional reporting by Claire Milhench, editing by Ed Osmond) ((sujata.rao@thomsonreuters.com; +44 20 7542 6176 sujata.rao.thomsonreuters.com@reuters.net))