By Riva Gold

Stocks steadied and the dollar eased off a 14-year high Friday as investors paused bets driven by expectations of higher U.S. interest rates.

The Stoxx Europe 600 inched down 0.2% in morning trade, as a recovery in real estate shares was offset by declines in the banking and retail sectors. Futures pointed to a flat open on Wall Street, while government bonds, gold and the yen showed signs of stabilizing after steep declines earlier this week.

The Federal Reserve raised interest rates Wednesday for the first time in a year and signaled a quicker-than-expected pace of rate rises in 2017, sending investors out of assets such as U.S. Treasurys and bond-proxies in the stock market.

Shares of banks gained, however, as higher interest rates tend to boost their margins, helping the Dow Jones Industrial rekindle its climb toward 20,000.

The WSJ Dollar Index was last down 0.2%, with the euro up 0.3% against the dollar at $1.0437. The euro is down around 1.5% against the dollar this month and touched its lowest level since 2003 on Thursday.

Some investors have questioned whether the moves are overdone, noting the Fed's projections for future rate increases have often differed from eventual decisions and that recent signs point to improvements in the eurozone economy.

"As the dollar appreciation has been very intense and rapid, we cannot rule out that softer housing data today in the U.S. may trigger some profit-taking and position paring," said Vasileios Gkionakis, currency strategist at UniCredit.

In government bond markets, the yield on the 10-year U.S. Treasury note inched down to 2.559% from 2.580% on Thursday, its highest in over two years, while its German counterpart fell to 0.316% from 0.367%. Yields move inversely to prices.

Greek 10-year yields fell to 7.295% from 7.428% after Greece's central bank said the country must stick to its bailout commitments if it wanted to end a dispute holding back efforts to secure debt relief. Eurozone officials have criticized Athens for failing to consult creditors before making fiscal moves that could affect its bailout goals.

Earlier, Japanese stocks touched a 2016 high after Wall Street's recovery on Thursday, even as stocks in Australia and Hong Kong posted modest declines.

Gold clawed back some ground after settling at its lowest since February, and was last up 0.6% at $1,136 an ounce. Copperprices fell, however, while Brent crude edged down 0.2% to $53.92 a barrel.

Stelios Bouras contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

December 16, 2016 05:38 ET (10:38 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.