UPDATE 1-Rising euro fails to dent German exporters' morale

(Adds details, background)

By Dave Graham

BERLIN, Oct 20 (Reuters) - Germany's foreign trade prospects will brighten in coming months despite the likelihood of a further rise in the euro against the dollar towards record levels, the BGA exporters' association forecast on Tuesday.

Over the months head, the euro-dollar exchange rate would rise above $1.50 and "test the $1.60 mark" before settling somewhere between $1.45 and $1.55, BGA president Anton Boerner told reporters at a news conference in Berlin.

The euro hit a 14-month high just short of $1.50 on Tuesday, and reached a record of just over $1.60 in the summer of 2008.

The weakness of the dollar was creating "certain problems", with auto firms, makers of machinery and equipment and the chemicals sector being hit harder than most, Boerner said.

Overall, though, trading activity would continue to pick up despite a monthly fall in exports in August, he added.

"I'm quite convinced we'll continue to make up ground in the remaining months of this year," said Boerner, noting that the upwards trend would continue into next year. Still, having suffered a sharp decline in the months following the collapse of U.S. investment bank Lehman Brothers last September, German exports would not return to their 2008 levels until 2012 at the earliest, Boerner said.

Germany has been the world's biggest exporter of goods since 2003, though China is expected to overhaul it soon, possibly this year. Demand for capital investment goods, a traditional German strength, has suffered severely in the slump.

This year, German exports would decrease by some 18 percent, before picking up again in 2010 by up to 10 percent, the BGA said. Imports would likely fall by around 15 percent this year, and rise by about seven percent in 2010, the group added.

In spite of the dollar weakness, Boerner said the fact that some 80 percent of German goods sold abroad were factored in euros meant it was important to keep things in perspective.

Despite their "close link to the dollar" newer markets like China were helping to make up for losses sustained in transatlantic trade, the association said.

In addition, the euro's strength was helping to reduce exporters' bills for key raw materials like oil, Boerner said. U.S. crude futures on Tuesday rose to a one-year high above $80 per barrel, lifted by a slump in the dollar. (Writing by Dave Graham; Editing by Andy Bruce)