The dollar stood near a 14-year peak, bond yields were highly elevated and Asian stocks struggled for traction on Friday as global markets continued adjusting to the idea of higher U.S. interest rates.

People walk past an electronic board displaying various Asian countries' stock price index and world major index outside a brokerage in Tokyo, Japan, August 21, 2015.

In a move that reverberated across the financial markets, the Fed on Wednesday raised rates for the first time in a year and projected three more increases in 2017, up from the two projected in September.

The dollar index against other major currencies last stood at 103.10 after storming to 103.56 overnight, its highest since December 2002.

The euro was steady at $1.0427 after hitting $1.0366 overnight, its lowest since January 2003. The dollar was little changed at 118.250 yen after surging to a 10-month high of 118.660 the previous day.

The prospect of the Fed tightening monetary policy next year faster than earlier expected drove the benchmark U.S. Treasury 10-year yield to highs unseen in two years.

"World markets continue to adjust to an outlook for higher U.S. interest rates and increased inflation risk boosted by major U.S. tax cuts," wrote Ric Spooner, chief market analyst at CMC Markets.

Tracking the rise in the U.S. 10-year note's yield, Japan's 10-year government bond yield brushed an 11-month peak of 0.10 percent. That gain is expected to test the Bank of Japan's resolve to keep the yield around zero percent.

Asian stocks were tepid, reflecting the differing fortunes for developed and emerging market economies faced with higher U.S. interest rates.

"Emerging market countries have been hit the hardest by capital leaving in search of higher yields and return along with the growing cost of paying back dollar denominated debt," wrote Kathy Lien, managing director of FX strategy at BK Asset Management.

MSCI's broadest index of Asia-Pacific shares outside Japan crawled up 0.1 percent after falling 1.8 percent on Thursday. The broader emerging market stock index was down 1.6 percent.

Shanghai gained 0.1 percent after losing 0.7 percent the previous day, while Malaysian and Indonesian shares were a touch lower. South Korea's Kospi added 0.3 percent.

Japan's Nikkei climbed 0.7 percent, reaching a one-year high on a weaker yen and gains on Wall Street overnight. U.S. shares rose on Thursday, brushing off the initial shock of a more hawkish Fed, led by shares of banks seen as beneficiaries of higher rates.

European stocks also gained on higher bank stocks, adding 1 percent on Thursday.

Emerging market currencies, hit after last month's U.S. election win by Donald Trump raised the spectre of higher U.S. rates, suffered a fresh blow from the Fed's latest move.

China on Friday set the yuan's midpoint at its weakest since 2008. Brazil's real fell as much as 2 percent overnight while the Indonesian rupiah and South Korean won saw their worst losses since Trump's win.

However, the Mexican peso strengthened after the country's central bank on Thursday countered the Fed's tightening with an aggressive rate hike.

In commodities, crude oil prices nudged higher as expectations that Kuwait would cut supplies by a larger than expected amount as part of a coordinated effort by oil producers to cut output offset negative pressures from a bullish dollar. [O/R]

Brent crude gained 0.5 percent to $54.27 a barrel.

Precious metals did not fare as well against a stronger dollar. Spot gold and platinum hit 10-1/2-month lows of $1,122.35 and $885 an ounce overnight while silver dropped to its lowest since June. [GOL/]

Copper was down 0.1 percent at $5,729 a tonne. It had surged to a 17-month peak above $6,000 in November on speculation that a Donald Trump presidency would usher in fiscal stimulus and boost demand for metals. [MET/L]

Source: Reuters