A strong currency may be a central banker's dream, but it can be a nightmare for companies. If they export to countries with weakening currencies, their goods become less competitive while imports into their home market become more so. Export sales fade while repatriated profits count for less. So, given that the great majority of European blue-chip firms are big exporters and that the euro has risen by some 50% against the dollar since its low in July 2001, why are European businessmen not depressed? France's business-confidence index has been rising since last June. Germany's IFO confidence index rose for nine consecutive months until a small blip in February. Only the Italians are gloomy, owing to their financial scandals. European businesses have been able to cope with a strengthening euro because of strong global growth and their use of foreign investments and hedging to protect against currency risk. Across the board, European firms lost between 8-10% in revenue growth because of the weakness of the dollar last year, says Walter Kemmsies of J.P. Morgan. Even so, European firms have been lucky--in particular, the recovery of the capital-expenditure cycle is soothing the euro pain, says Joachim Fels, an economist at Morgan Stanley. The euro's appreciation coincided with rising demand for European goods. In their budgeting for the coming year, now reaching its conclusion, most European firms are assuming that the dollar will stay around $1.20 to the euro. But BMW, for one, thinks that the euro is now overvalued, and has stopped hedging against further falls in the dollar.