The yen was buoyant across the board as carry trades were trimmed back on rising risk aversion. The dollar dropped to a low of 109.26 yen, its lowest level for a year and a half, while the euro fell below 160 yen for the first time in nearly two months. "Along with a constant drip of credit-related problems simmering in the background, the yen's recent ascent has been part of a broad retrenchment in risk amidst concern over the impact on global growth of multi-decade highs in many currency pairs and asset prices," said Simon Derrick, currency strategist at Bank of New York Mellon. Analysts have also noted that the yen's return to favour in recent days and weeks has not all been about the weakness in the dollar. The acceleration in the appreciation of the Chinese yuan has also helped the Japanese currency against the Swiss franc. Another record Chinese trade surplus in October has stoked talk of further appreciation in the yuan and/or another interest rate rise from the People's Bank of China. With very little economic data and US trading trimmed by Veteran's Day, currency markets are likely to take their cue from equity markets, which appear to have steadied after Friday's losses. US economic data, particularly retail sales and inflation numbers, over the coming few days will be closely monitored to see if they fuel market expectations of another interest rate cut to 4.25 pct in December from the US Federal Reserve. However, most commentators think the dollar's gains today have been exaggerated by the lack of liquidity associated with the US holiday. "It's not durable," said Neil Mackinnon, chief economist at ECU Group. "The backdrop of credit and banking worries will keep the dollar bears in control," he added. Elsewhere, the pound has been suffering badly on concerns about the UK economy though this morning's producer price data for October diminished market expectations of an imminent rate cut from the Bank of England. Wednesday's Inflation Report from the central bank will be closely monitored. Though it is expected to paint a gloomier picture of the UK economy's prospects for 2008 than previous ones, the BoE is still likely to emphasise ongoing inflationary pressures.