The US dollar hit a 14-year peak today, while the Dow Jones Industrial Average and Nasdaq closed at record highs as global markets continued to monitor fallout from yesterday's attacks in Turkey and Germany.
The Dow neared the 20,000 threshold today, but it stopped just short at a record closing high of 19,974.01, up 0.46 per cent.
The strong dollar pushed yields on benchmark US 10-year bonds up to session highs of 2.59 per cent today as investors look to move money out in favour of risk assets.
"Investors have become so fast in digesting bad news, and this explains the resilience in financial markets," Hussein Sayed, chief market strategist at FXTM told Reuters.
Following Republican candidate Donald Trump's surprise victory in the 8 November election, US stocks have continued to rally. The S&P 500 has risen nearly six per cent due to the President-elect's plans for tax cuts, deregulation and infrastructure spending.
Trump's win was made official yesterday after he surpassed the 270 Electoral College votes needed to secure the White House.
The Dow rose 91.56 points today, up 0.46 per cent to 19,974.62, the S&P 500 added 8.23 points, up 0.36 per cent to 2,270.76 and the Nasdaq gained 26.50 points, up 0.49 per cent to 5,483.94.
The dollar index rose almost 0.5 per cent to 103.65, its highest level since December 2002.
Yesterday, a hawkish speech by Federal Reserve chair Janet Yellen on the state of the US labour market strengthened the dollar further.
"The dollar and bonds have been trading in lockstep," Ellis Phifer, senior market strategist at Raymond James in Memphis, Tennessee, told Reuters. "There are still concerns spending will increase and more debt supply will be on its way."
The prospect of a growing stock market provides an incentive for investors to move money from bonds to equities.
"At the moment, with the Fed’s complete confidence in the economy along with major fiscal boost expected from a Republican government, the dollar is likely to be strong in the first quarter of 2017," Mihir Kapadia, cheif executive and founder of Sun Global Investments, said.
Kapadia said the strong dollar would put pressure on commodities, especially gold. "The precious metal faces a further downward pressure as it yields no interest in a world of likely rising interest rates and bond yields. We expect this trend to continue for the next few months."