USD can rise 15% by 2014 end: Morgan Stanley

Strengthening dollar and rising US treasury yields are giving a tough time to emerging markets like India, Indonesia, Thailand, Singapore and Hong Kong, says Chetan Ahya, Asia Pacific Economist, Morgan Stanley.

The strengthening of US dollar, which has seen 11 years of weakness, is a systematic trend. The US economy is expected to perform well ahead, so one should brace up for another 14-15 percent rise in dollar until end 2014, he told CNBC-TV18 in an interview.

"It is kind of trend. I wouldn't say that this is going to be a reversal from here and that we are going to go back to the old levels of rupee. If the dollar is on a systematic rise that we have to build certain amount of inflation differentials reflecting in the currency," he added.

Given the current global economic environment, the real interest rates are rising, so the property markets in Asia are likely to remain under pressure.

Meanwhile, he cautions that the growth environment for India will be challenging. "To deal with high CPI and current account deficit (CAD), India will have to lift real interest rates, which have challenges in generating leverage and domestic demand, so it has impacted India's growth outlook," he explained.

He feels that the Reserve Bank of India (RBI) has moved too fast in cutting interest rates. So, going ahead even if the CPI decelerates, the interest rates in the market will remain elevated whether RBI cuts rates or pauses.

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