Business leaders fear the plunging dollar will derail the tentative recovery in the global economy.

For Irish companies competing in the US, the short-term effect of the dollar's slide has been a drastic decline in margins. In order to compete effectively with US rivals, firms are being forced to cut costs - lowering already slender profit levels.

Some have dramatically scaled back expansion plans while others say their long-term viability could be in jeopardy.

A weaker dollar simply makes it harder to do business in the US, explains Mr John Brosnan, chief executive of Net Fort ISS, a Galway-based network security provider.

He was speaking at a forum for chief executives organised by Enterprise Ireland and Deloitte & Touche.

"When you are competing with a US company for a contract, they have a massive advantage over you. So you are forced to match their offer. The only way you can do this is by reducing your margins."

Closing deals with multinationals operating in the Republic has also become more difficult, as is building on a relationship with the local subsidiary of a global business.

"A multinational might want to recommend your product to its divisions in other countries but will find that it is too expensive to justify," says Mr Brosnan.

With overheads climbing drastically over recent years, a slump in the dollar could not have come at a worse time, said Mr Michael Maloney, chief executive of Eurocommerce, a Dublin-based provider of online credit solutions.

"The business environment is already difficult enough. This is an extra strain we could do without," he says.

Ironically, the fall in the value of the dollar has coincided with an apparent resurgence in the US economy, encouraging many US firms to tender for business on this side of the Atlantic, he says.

"It's good news that the American economy is showing signs of a turnaround but this puts US companies in a very strong position to compete with us."

A strong euro may force US companies based in the Republic to scale back on spending with ominous implications for small firms heavily dependent on the multi-national sector, says Mr Diarmuid O'Dwyer, chief executive of DOD Technologies, a provider of online booking solutions.

"You also have to fear that multinationals will be encouraged by politicians in the US to repatriate jobs to the United States as it becomes more expensive to do business here."