By Jessica Mead Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The dollar gained across the board in European trading Friday, capturing support from its status as a safe retreat in times of stress as nerves resurfaced over political tensions in Egypt. The risk of a fresh bout of violent protests has risen since Egyptian president Hosni Mubarak defied expectations by insisting Thursday he will remain in his position, and the situation could deteriorate after Friday prayers. The army is backing Mubarak to retain power until the end of his term. Partly as a result, the perceived safe-haven dollar has pushed higher. The typical rush to safety has not taken its usual course, however, as other safe bets such as the yen and Swiss franc have dropped down to their lowest levels in a month--a highly unusual pattern for a nervous trading day. Analysts agree that a nudge higher in U.S. bond yields is attracting investors to U.S. assets, and bolstering the greenback. "The Japanese yen and the Swiss franc are the two lowest yielding currencies that have not experienced any significant rise in yields," said Paul Robson, senior currency strategist at RBS. This is making them the top new picks among traders to sell against higher-yielding currencies, he added. The Swiss franc has also lost some lustre because of weak inflation data Thursday. Consumer price index data for January produced a reading of -0.4% on the month, against expectations for -0.1%, denting expectations for an interest-rate rise. "This has added to the pressure on the Swiss franc against the dollar," Citigroup noted. Events during Asian trading hours have also helped boost the dollar, according to Adam Cole, chief currency strategist at RBC Capital Markets. Cole said that the failure of the Bank of Korea to deliver an expected rate hike, a higher fix in the dollar against the yuan and a 8.5% devaluation of the Vietnamese dong all gave the dollar support against Asian currencies. "This is spilling over into major currencies," he added. Acting as another short-term support to the dollar, several London traders noted a large flow into the dollar against a range of other currencies from a U.S. bank. A joint press conference held by German Finance Minister Wolfgang Schaeuble, his French counterpart Christine Lagarde and the European Central Bank's Christian Noyer had no dramatic impact on the euro. However, ECB hawk Axel Weber is scheduled to meet German Chancellor Angela Merkel at 1400 GMT, which may give the pair some direction in New York trading. Sterling had been little changed against the dollar and the euro after data showed that U.K. factory gate inflation rose to an eight-month high in January, but came under pressure later in the session, falling to its lowest level in February against the dollar so far of $1.5984. The acceleration was driven by fuel, food and chemicals prices. Output prices rose 4.8% in the year to January while the monthly gain was 1%, faster than the 0.7% tipped by economists. While the data ought to support the interest rate hawks at the Bank of England, the BOE kept interest rates unchanged Thursday so the market focus has turned to the quarterly inflation report Wednesday and the February BOE minutes the following week. The Australian dollar slipped back below parity against the U.S. dollar after Reserve Bank of Australia Governor Glenn Stevens said the RBA isn't contemplating a rate hike right now. The Australian dollar was at US$0.9983 at 0530 GMT, from around US$1.0037 prior to Stevens' speech. It managed to regain some of its losses, but remained below parity. The Bank of Korea left interest rates unchanged to support the economy in the face of global risks such as the turmoil in Egypt but the central bank suggested that it would raise the cost of borrowing next month to fight accelerating inflation. Elsewhere in Asia, Vietnam devalued the dong for the fourth time since November 2009. The move lowers the value of the dong by 8.5% against the dollar and means that the authorities have weakened the currency by 13.6% since November 2009. At 1150 GMT, the euro was trading at $1.3524 against the dollar, compared with $1.3600 late Thursday in New York, according to trading system EBS. The dollar was at Y83.57 against the yen, the day's high, compared with Y83.22, while the euro was at Y113.02 compared with Y113.13. Meanwhile, the pound was trading at $1.5989 against the dollar, compared with $1.6093 late Thursday in New York. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 78.612 compared with 78.199 late Thursday in New York. A summary of key levels for chart-watching technical strategists is below:

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