The euro’s advance in recent months has come at a critical junction for the 16-member eurozone as it battles to emerge from what has been dubbed the Great Recession.

After gaining about 20 percent against the dollar since the early months of 2009, Europe’s common currency is now within reach of breaching the key 1.50-dollar barrier.

“The euro is currently a victim of its own success,” said ING Bank currency analyst Chris Turner. “Global investors have distinctly fallen out of love with the US dollar and there are very few alternatives.”

While still short of the more than 1.60-dollars all-time high that it hit in mid-2008, the common currency’s climb has raised worries about the threat posed to the eurozone’s global competitiveness and as a result its key export machine.

After only narrowly missing out on emerging from recession during the second-quarter, the eurozone is now seen by economists as having shown a rise in the third quarter which ended September 30.

This is especially the case as the eurozone’s two biggest economies — Germany and France — climbed out of recession during the second quarter.

But the International Monetary Fund (IMF) warned in its latest review of the world economic outlook that the eurozone faces only sluggish economic growth next year.

Although marginally better than its last set of forecasts, the economy built around Europe’s common currency is seen by the IMF as contracting by 4.2 percent this year before growing by an anemic 0.3 percent in 2010.

Further underscoring the fragile state of the currency bloc’s recovery, eurozone exports slumped by 5.8 percent month-on-month in August, latest data show, canceling out the gains made in the two previous months.

“August’s disappointing trade figures highlight the fact that the external recovery remains fragile and is why the euro’s strength is so unwelcome,” said Ben May, economist with the economic research group Capital Economics.

Underlining the impact of the global recession on eurozone trade, the currency bloc’s exports plunged 22.8 percent year-on-year in August.

A lower dollar might help to reduce Washington’s current account deficit and bolster American exports, in turn helping the world’s biggest economy with its struggle to put the worst economic decline in a generation behind it.

But tougher competition for eurozone exports could crimp Europe’s economic growth rate just as signs have emerged that a recovery has been gaining ground across the currency bloc.

The risks for eurozone exports also comes amid worries about the threat posed to private consumption across the currency bloc by forecasts of a pickup in unemployment as the economy turns in only a modest expansion rate.

The result is that exports could become the key pillar of the eurozone’s recovery from the economic downturn that engulfed the region over the last year.

This in turn has prompted a wave of concern from European leaders with European Central Bank chief Jean-Claude Trichet this week stepping up his verbal intervention in foreign exchange markets.

Echoing his comments made earlier this month at his regular monthly press conference, Trichet said late Monday: “We all note with considerable attention the statements made by American authorities as regards their support in favor of a strong dollar.”

After a eurozone finance ministers meeting in Luxembourg, the ECB chief said “excessive volatility and disorganized developments in the exchange market was bad for economic development.”

But at least for the time being, the markets don’t seem to be listening, with the euro trading at 1.4976 on European forex markets Tuesday. The lower dollar and expectations that a pickup in global economic growth could translate into higher energy demand has already helped to propel oil prices to their highest level this year.

Going forward, however, analysts are also somewhat divided about the euro’s prospects for the coming months with some forecasters now talking about the common currency climbing to 1.55 dollars before the end of the year.

In the meantime, analysts believe that the sense of uncertainty surrounding the currency bloc’s outlook means that the eurozone’s interest rates could remain at their current historic low of 1 per cent until the middle of next year or even longer.