* Germany to raise 2010 growth forecast to 3.4 pct - source
* German business group: strong euro would weigh on economy
(Adds chambers of commerce)
By Gernot Heller and Joern Poltz
BERLIN, Oct 20 (Reuters) - Germany will more than double its growth forecast for 2010, a cabinet source said on Wednesday, and the Chambers of Industry and Commerce (DIHK) produced a matching forecast for Europe's largest economy this year.
"It will be 3.4 percent for this year and 1.8 percent for next year," the cabinet source, who was familiar with the growth forecasts, told Reuters.
Berlin, which will release its latest forecasts on Oct. 21, had previously predicted 1.4 percent growth for 2010.
The new forecasts point to a faster-than-expected recovery but are slightly below estimates made last week by leading economic research institutes for 3.5 percent growth in 2010 and 2.0 percent growth in 2011.
Earlier on Wednesday, the DIHK released its thrice-yearly survey of more than 25,000 companies, stating that the recovery had become sustainable and domestic demand would pick up in the months ahead. [ID:nBZNKLE62H]
The DIHK said it expected 3.4 percent growth in 2010 and 2.4 percent growth in 2011, while unemployment would fall below the key psychological 3 million mark in 2011 to 2.9 million.
"Firms' business expectations are improving, although at a weaker pace," the DIHK said. "Some uncertainty is mixing with the general optimism over the economic outlook."
Germany emerged from its deepest post-war recession in the second quarter of last year and is staging a strong recovery which is spreading from its export sector to domestic demand.
CURRENCY THREAT?
But the economy will come under pressure if the euro
"The air is thin around $1.50," said Treier.
Treier said he expected the euro to trade between $1.40 and $1.45 in the near term. The currency was trading at around $1.38 in midday trade.
Germany's main foreign trade group told Reuters on Tuesday the economy would grow by less than 1.5 percent in 2011, losing steam under the twin threats of protectionism and a spiral of currency devaluations. [ID:nLDE69I1W3]
Currency tensions have escalated in recent weeks in the run-up to meetings of the Group of 20 leading nations in South Korea, with countries at odds over what exchange rates are appropriate for fostering balanced growth. [ID:nTOE69E02T]
Treier said China's surprise interest rate hike on Tuesday had little impact for Germany, and was modest and appropriate.
For a table with details of the DIHK survey, please click on [ID:nBZNKLE62H] (Writing by Sarah Marsh, editing by Mike Peacock)