NEW YORK/TOKYO >> The yen rose to a three-week high against the dollar today, while the greenback rallied from an eight-month low, as geopolitical tension in the Middle East intensified, prompting investors to seek shelter in these currencies.

Another safe haven, the Swiss franc, also rallied against major peers.

Trading activity is expected to be lighter than usual, with UK markets closed for a public holiday.

Israel and Hezbollah fired missiles at each other over the weekend in one of the biggest clashes in more than 10 months of border conflict. Hezbollah launched hundreds of rockets and drones at Israel early on Sunday, as Israel’s military said it struck Lebanon with around 100 jets to thwart a larger attack.

“The story today is definitely hinging on geopolitical risk, and we can see the FX market reaction both in the pause in the U.S. dollar selloff and the yen gains this morning,” said Helen Given, FX trader, at Monex USA in Washington.

She added that the yen has gained more than the other safe havens, particularly against the dollar, as it continued to benefit from an expected U.S. interest rate cut next month, which was confirmed by Federal Reserve Chair Jerome Powell last Friday in a speech in Jackson Hole, Wyoming.

In mid-morning trading, the dollar dropped to a three-week low against the yen of 143.45 and was last down 0.2% at 144.18 yen.

Helping the yen strengthen, Bank of Japan chief Kazuo Ueda reaffirmed on Friday his resolve to raise interest rates if inflation stayed on course to sustainably hit the 2% target.

Many market participants had expected Ueda to strike a less hawkish tone in a special session of parliament, called amid criticism the BOJ’s surprise hike last month helped spark a rapid unwind of bearish yen bets and an aggressive sell-off of Japanese stocks.

The dollar did recover a bit against the yen after data showed U.S. durable goods orders surged 9.9% in July, after falling in June. However, non-defense capital goods orders excluding aircraft, a closely-watched proxy for business spending plans, dipped 0.1% after a downwardly revised 0.5% increase in June.

The dollar index, a gauge of the dollar’s value against six major currencies, inched up 0.1% to 100.72, rising from its lowest since late December of 100.53.

The euro eased 0.2% against the dollar to $1.1175, in a sign of a safe-haven move towards the greenback. Sources told Reuters that ECB policymakers are lining up behind another rate cut on Sept. 12.

The risk of sentiment also weighed on the Australian and New Zealand dollars and the Norwegian crown, which were all lower against the dollar, but benefited the Swiss franc.

The dollar fell 0.12% against the Swiss franc to 0.8466 francs. The euro also fell 0.3% against the Swiss currency to 0.9460.

Sterling eased 0.1% against the dollar to $1.3204 after jumping as far as $1.3229 on Friday for the first time in 17 months. Bank of England head Andrew Bailey said on Friday it was “too early to declare victory” over inflation signaling a less aggressive stance on interest rate cuts than the Fed.