The Central Bank warned today of the risk of a possible surge in the euro but said aside from this the prospects for the economy remained positive.
"A significant euro appreciation cannot be ruled out, as part of a possible correction of the persistent US current account deficit," the bank said in its quarterly bulletin.
Such movements in the currency could put competitiveness strains on the exporting sectors, it said.
Depreciation of the euro around the middle of the year had eased competitive pressures on the exporting sectors, it said, but significant short-term risks remained.
However, despite a number of external and domestic risks Ireland's economy was on track to grow at around twice the rate of its euro zone peers this year.
The bank stuck to its previous forecasts - issued in May - for gross domestic product (GDP) growth of 5.5 per cent this year and next, and gross national product (GNP) growth of 5.25 per cent. High oil prices were also a threat, it said.
"The price of oil remains both high and volatile and while the domestic economy's exposure to the direct impact of oil price rises has declined over time it cannot avoid the indirect effects that would arise from slower growth in the country's trading partners."
On the domestic front, the level of private sector credit, and its growth - running at an annual rate of around 25 per cent - remained a concern.
The construction sector, boosted by demand from the country's economic boom in recent years, accounted for a proportion of output and employment that was unsustainable over the medium term, the bank warned.
"These are causes for concern but, on balance, the outlook remains essentially a positive one," it said. The bulletin coincided with the release of first-quarter growth figures which showed GDP up 2.4 per cent compared with the same period of 2004, and GNP up 3.9 per cent.
Forecasts for the numbers had varied widely, with GDP seen up anywhere between 2 and 6.1 per cent; annual GNP growth had been forecast in a range of between 3 and 5.75 per cent.