When investors allocate to foreign stocks, they typically assume a secondary currency exposure on top of their local equity market returns. This secondary currency exposure—or “currency bet”—can increase returns during periods when the euro, yen, British pound and other foreign currencies are rising versus the dollar. But it can also decrease returns when those foreign currencies are falling in value. If investors do not have strong conviction in the potential direction of the euro, yen or British pound, WisdomTree argues they should at least a portion of their exposure to these currencies. Moreover, WisdomTree believes we may be entering a period when the U.S.

Dollar increases in value in a secular trend. Gui Booter Cracked Tongue. This view is based on changes unfolding in central bank policies, as well as likely changes in interest rate policies developing between Europe, Japan and the United States. This does not mean one should allocate less to foreign stocks if the dollar is rising—in fact this could have the potential to be the best time to own foreign stocks, as illustrated in Japan in 2013.