In one of the most explicit signals yet of emergency lending to the financial markets and the most aggressive expansionary monetary policy coming to end, the Federal Reserve chaired by Ben Bernanke raised the rate charged to banks for direct loans; better known as the discount rate, by a 25 basis points to 0.75 per cent, with immediate effect.

Calling it 'normalization' of lending, the Board of Governors said that it will have no impact on the monetary policy, reiterating that its benchmark federal funds rate would stay near zero to 0.25 per cent for an 'extended period.' Federal Fund Rate is the rate at which a depository institution lends surplus available funds to another depository institution overnight.

The dollar rose to $1.3485 per euro in afternoon Asian trade in Tokyo from $1.3527 late yesterday in New York, after climbing to $1.3444, the strongest since May 18. Asian markets fell and European markets opened with gap-down. Japan's Nikkei 225 closed at 10123.58 down 2.05 per cent or 212 points.