By Riva Gold

Stocks advanced and the dollar steadied around a 14-year high Friday, as investors paused bets on climbing U.S. interest rates.

Futures pointed to a 0.2% opening gain for the Dow Jones Industrial Average, putting the blue-chip index back on course toward the 20000 mark -- a level it has never reached.

The Stoxx Europe 600 inched up 0.2% in afternoon trading, on track for its highest close since January. Including dividends, the index is now back in positive territory for the year, recovering from double-digit falls inFebruary.

Government bonds, gold and the yen stabilized, meanwhile, after posting steep declines on Wednesday and Thursday.

The Federal Reserve raised interest rates on Wednesday for the first time in a year and signaled a quicker-than-expected pace of rate rises in 2017. The decision accelerated a post-election shift into the dollar and out of assets such as U.S. Treasurys and bond-proxies in the stock market.

Toward the end of the week, however, some investors were questioning whether the moves were overdone, noting the Fed's projections for future rate increases have often differed from eventual decisions on monetary policy. U.S. stocks rekindled their post-election rally on Thursday after initially falling on the Fed's projections.

The Dow is now up more than 5% from a month ago, on track to end 2016 nearly 14% higher than it started.

"We're finishing the year on this wave of optimism," said Mitul Patel, head ofinterest rates at Henderson Global Investors. "Stocks are hovering around highs, but it feels like we're on a bit of a tightrope at the moment."

For the stock market to perform well, "you need growth to be good and inflation to be OK, but you need the Fed not to sound too hawkish," he said. "If the Fed or the data disappoint, it could come under pressure."

That optimism has also started to spill over into corporations, as the Federal Reserve Bank of Philadelphia's December manufacturing survey showed firms are much more optimistic about future employment and capital spending over the first half of next year.

A stabilization in the dollar on Friday also helped support sentiment toward stocks, with the WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, flat after a three-day rally.

Many investors have been concerned about the rapid appreciation of the dollar, which could hamper a widely expected U.S. earnings recovery and make it more difficult to pay back the trillions in dollar-denominated debt around the world.

The euro climbed back 0.2% against the dollar Friday to $1.0433 after touching its lowest level since 2003 on Thursday, while the dollar was flat against the yen after climbing more than 2% against the Japanese currency earlier this week.

In government bond markets, the yield on the 10-year U.S. Treasury note steadied at 2.578% from 2.58% on Thursday, its highest in more than two years, while its German counterpart edged down to 0.306% from 0.367%. Yields move inversely to prices.

Greek 10-year yields fell to 7.3% 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 bailoutgoals.

The yield on China's benchmark 10-year government bond rose sharply to 3.333%, its highest level since September 2015.

Earlier, Japanese stocks touched a 2016 high, led by the financial sector, with the Nikkei Stock Average closing out its sixth straight week of gains.

Japanese financials have benefited from rising yields on global government bonds, in which they invest heavily, while the weaker yen has been a boon to shares of Japanese exporters, who repatriate earnings overseas.

Stocks in Australia and Hong Kong posted weekly declines, while Shanghai stocks closed out their worst week since April. Since the U.S. election, investors have grown more worried about the prospects for emerging markets, as well as capital outflows from China.

"The concerns are higher rates, a stronger dollar, and Trump-specific trade friction coming up," said Anthony Cragg, who manages emerging-market funds at Wells Fargo Asset Management.

Mr. Cragg argues the fears are overdone, noting a stronger U.S. economy could offset the climb in the dollar and help support emerging markets.

In commodities, gold clawed back some ground after settling at its lowest since February, and was last up 0.5% at $1,135 an ounce. Copper prices fell 1%, while Brent crude oil was up 0.7% at $54.41 a barrel.

Stelios Bouras and Ese Erheriene contributed to this article.

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

(END) Dow Jones Newswires

December 16, 2016 09:08 ET (14:08 GMT)

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