"It's definitely a problem," said Bridget Hughes, international fund analyst with investing information firm Morningstar. "It definitely takes away from your returns."

Most fund managers said currency ups and downs were simply one of the vagaries of international investing and that after taking steps to limit the damage, there was not much to be done other than hang on and wait for the tide to turn.

Many international funds have trimmed their exposure to the continent and some Europe-specific portfolios have hedged against currency risk, but most see their job as picking stocks, not making currency bets. Most managers acknowledged that they sensed a sharp turn for the worse in sentiment about the euro, which was launched in January 1999 as a currency shared by 11 European nations.

Several said they had heard that some institutional players were planning to sell, but the same could not be said of mutual funds.

"I have heard those rumours, but I can't tell where they're coming from," said James McAlear, who runs the $260 million Columbia International Stock Fund. "It does seem as though there has been some hedge fund liquidation," he said.

Last week, international investor George Soros said he was reorganizing his hedge funds after big loses due in part to a bet that the euro would climb.Instead Europe's common currency has fallen more than 11.2 percent this year, bringing its total loss since it was created to about 24 per cent.

The losses for the currency have been enough to more than wipe out gains in some of Europe's stock markets that would have boosted mutual fund returns.Data from fund tracker Lipper Inc shows that European Region funds have slipped sharply as the euro hit new lows.

Year-to-date, the category shows a return of 0.09 per cent and in the past month the average fund in the category has lost 5.42 per cent. This compares with a one-year return of 25.39 per cent.

Morningstar data shows a similar plunge, with the average fund returning 24.55 per cent in 1999 and only 2.57 per cent year to date. The last month has been particularly rough, managers said, and as many as 75 to 80 per cent of European funds are in the red for the year.

But managers point out that the weakening currency is a two-sided coin which hurts returns of US funds, but also boosts corporate earnings for European companies and sets the stage for an economic rebound that would boost those returns.

Most said they believe the bottom is not far for the euro, which was trading around 89 cents to the dollar on Wednesday, though they declined to be specific. On its first day of trading 16 months ago, the Euro reached its highest level of $1.17 and has been steadily falling ever since.

"The euro is hurting our performance obviously because of currency losses, but the euro helps European growth and industry," said Thomas Mengel, who manages the $225 million Waddell Reed International Growth Fund.