By Lisa Twaronite, MarketWatch TOKYO (MarketWatch) -- The dollar headed higher in Asian trading Friday, after the U.S. Federal Reserve delivered a surprise hike in its discount rate late Thursday after the close of U.S. markets. The Dollar Index (DXY 81.22, +0.82, +1.02%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, was at 81.151, up from 80.38 ahead of the Fed move. The dollar jumped to 91.65 yen from 91.27 yen, while the euro slumped to $1.3527, from $1.3607 before the Fed's move. The Fed said its 25-basis-point hike of the discount rate to 0.75% was to encourage banks to borrow more from the private market, and cautioned this was not a tightening of its monetary policy. See full story on Fed's discount rate hike. "Although the reaction looks overdone and will likely be followed by some consolidation over the short term, the move will be interpreted as the beginning of a move towards monetary-policy normalization despite the Fed's insistence that this is not the case," Mitul Kotecha, head of global forex strategy at Calyon, said in a note to clients. "The firm U.S. dollar tone is set to remain in place for now, but the bulk of the strengthening has likely already occurred following the announcement," Kotecha said. In emailed comments Friday, Uwe Parpart, chief Asia strategist at Cantor Fitzgerald, highlighted the major change in play for the Japanese yen. "It's important to realize that the yen was, in any case, poised for a fall as its short-term [three-month London interbank offered rate] advantage over the U.S. dollar had all but disappeared prior to the Fed move," Parpart said. The yen "will now find itself reinstated as preferred funding currency for carry trades," he said. Carry trades involve borrowing funds denominated in lower-yielding currencies and investing them in higher-yielding assets.

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