UPDATE 1-SAP says U.S. challenging, Europe and Asia strong

(Adds comments on acquisitions, currency; background)

BERLIN, May 18 (Reuters) - Business conditions in the United States remain challenging for software maker SAP (SAPG.DE: Quote, Profile, Research) thanks to the financial industry crisis, but there are no signs matters are worsening, and demand in Europe and Asia is strong, co-Chief Executive Henning Kagermann said on Sunday.

"Europe and Asia are still strong," Kagermann told journalists on the eve of the company's annual European conference, "Sapphire," in Berlin.

Kagermann said he was "not too optimistic" about this year but said the company's profit targets left enough room for conditions to worsen without the targets' having to be adjusted.

"We have enough flexibility," he said.

SAP is targeting an operating profit margin of 28.5 to 29.0 percent this year, up from last year's 27.3 percent, excluding a revenue write-down of 180 million euros ($279 million) relating to the company's acquisition of software firm Business Objects, and excluding acquisition-related charges.

Kagermann said SAP, the world's leading maker of software applications that help businesses manage and automate processes ranging from supply chain management to human resources, would hold off further large acquisitions until the integration of Business Objects was complete.

"We are first focused on integration," he said, adding that that should be complete before the end of the year.

Kagermann added that he did not expect the euro to continue rising as sharply against the dollar <EUR=> as it has of late. "The biggest upwards push is behind us," he said.

He said he expects a rate of $1.50 to the euro in future. ($1=.6461 Euro) (Reporting by Hendrik Sackmann, editing by Gerald E. McCormick)