* Oil prices slip on doubts on production cut deal this week
* U.S. bond yields, dollar fall from highs
* Battered emerging markets win reprieve
* Italian banking shares drop 3 pct on political worries
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Nov 28 (Reuters) - The dollar saw its biggest drop in almost a month on Monday as a bashing for oil prices on doubts about an OPEC output cut this week left investors reversing "Trumpflation" trades that have gripped markets since the U.S. election.
Crude prices and Europe's main stock markets were down over 1 percent in early European trading as Italian shares also took a fresh tumble ahead of its referendum on constitutional change this Sunday.
Oil's fall added to a 3.5 percent plunge on Friday when it emerged that Saudi Arabia would not join talks with non-OPEC producers on potential supply cuts.
With oil so vital for global costs it was rapidly cooling bets on a near-term inflation jump and tempering expectations for rises in U.S. interest rates that have been running up fast in recent weeks.
The dollar sank as much as 1.6 percent against the yen, going as low as 111.355 yen before recovering slightly to 112.00.
That was still its biggest fall against its Japanese rival since October 7 and against a basket of top world currencies it was the greenback's worst day since November.
"It's a bit of a pull back in the dollar," said Societe Generale strategist Alvin Tan. "The fall in oil is pushing back U.S. bond yields and that is leading the consolidation in the dollar.. there is more scepticism about an (OPEC) output cut now."
The moves hoisted the euro to an 11-day high $1.0686 as it got a lift too from the election of Francois Fillon as the centre-right candidate in next year's French presidential election.
The reformist former prime minister is now favourite to become president, with a flash opinion poll showing he would easily beat National Front leader Marine Le Pen in a run-off second round. Markets worry the far-right Le Pen, who has promised a referendum on membership of the European Union if she wins, would threaten the future of the currency bloc.
Italy, which has been plagued by political concerns ahead of its referendum on constitutional reform, remained a more obvious concern meanwhile.
Having lost more than half their value over the last year, Italian banking stocks fell 3 percent to their lowest in almost two months as Italian government bonds also underperformed the wider rally in fixed income.
Opinion polls now predict defeat for the government in what would be the third big anti-establishment revolt by voters this year in a major Western country, following Britain's unexpected vote to leave the European Union and the U.S. election of Donald Trump.
"Fears are that an Italian dissent and resulting market turmoil would dissuade already gutsy investors from daring to participate in desperately needed recapitalisations within a very troubled 4 trillion euro banking system," said Mike van Dulken, Head of Research at Accendo Markets.
As the dollar wilted in the currency markets, gold bounced back to $1,192.0 per ounce from Friday's low $1,171.5, which was its lowest level since early February.
Industrial metals also remained red hot on hopes of strong demand for property and infrastructure investment in China and the United States.
Chinese steel futures jumped over 6 percent, while iron ore futures also gained about six percent and zinc, used to galvanise steel, powered to a nine-year high on the London Metal Exchange.
Asian shares rose 0.4 percent overnight, led by gains in Hong Kong and Taiwan though Japan's Nikkei, which has been performing even better than a record high Wall Street in recent weeks thanks to the yen's fall, ended down 0.1 percent.
"It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump's policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
In the bond markets, the yield on 10-year U.S. Treasuries dropped almost 5 basis points to 2.323 percent, off its 16-month high of 2.417 percent touched last week. Europe's benchmark, German Bunds, saw their equivalent yield drop 3 basis points.
U.S. stock futures slipped 0.2 percent ahead of U.S. trading. Wall Street's four main indexes all hit record highs last week, a feat last achieved in 1999. (Editing by Janet Lawrence)