The CFA franc is likely to remain pegged to the euro at a rate of CFAfr655.96:EUR1 during the forecast period, and will therefore fluctuate against the US dollar in line with the exchange rate between the dollar and the euro. We forecast a weaker euro in 2011 and in the medium term, amid persistent concerns about debt default and a break-up of the euro area. Although our assumptions about monetary policy in the euro zone and the US now imply that trends in interest-rate differentials will be broadly neutral for the exchange rate, concerns about euro-zone debt sustainability are likely to be the dominant factor in movements in the currency pair. Overall, we forecast that the CFA franc will average CFAfr524.8:US$1 in 2011 and CFAfr546.6:US$1 in 2012.