The US dollar was higher in early London trade, benefiting from safe haven flows in reaction to the ongoing violence in the Middle East and concerns over spiralling oil prices. The dollar reached 18-day highs against the yen and the euro, which fell below the 1.26 usd mark, while the Swiss franc also benefited, earlier hitting 26-day highs against the euro. "The dollar has been once again acting as a safe haven currency of sorts, with weakness in equity markets leading investors to park their funds in the high yielding and liquid dollar," said UBS currency analyst Ashley Davies. This trend looks set to continue for the time being, with no end in sight to the current hostilities between Israel and Lebanon, he noted. For today, trading has been quietened with markets closed in Japan and South Korea for a public holiday ahead of a busy week ahead. Today, euro zone inflation data and the US Empire survey and industrial production figures will catch some attention, but the main focus of the week will centre on Wednesday's testimony by US Federal Reserve chairman Ben Bernanke and US inflation data on the same day. The inflation figures are likely to be benign, but unless Bernanke "definitively signals" a pause in US interest rate increases, markets are "likely to be cautious about pricing out further tightening too fully," Davies said. "As such, we would be cautious about fading this past week's dollar strength, particularly with pressure on global equity markets likely also once again contributing to renewed liquidation of foreign equity holdings by US investors," he added. Meanwhile, with last week's decision by the Bank of Japan to raise interest rates for the first time in over six years very well flagged by the markets, monetary policy is not directing the yen at the moment, with high oil prices and weak equity markets continuing to weigh on the currency. Euro zone data this week -- including June CPI data this morning and the German ZEW economic expectations survey tomorrow -- are likely to add weight to the argument for further interest rate hikes, but again this is unlikely to benefit the euro for now, with three rate rises already priced in over the next two quarters, Davies said. "The euro is showing diminished ability to benefit from strong data now, and we would not look for the numbers to boost the currency notably," he said.