WisdomTree Blog

Why Take Currency Risk If Diversification Benefit Is Declining?

We have been exploring the case for layering in foreign currency ("FX") on top of foreign equity returns. One of the most common arguments I have heard for taking on FX risk in international equity portfolios in an unhedged fashion is that FX can be a portfolio “diversifier.”

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Don’t Layer Currency Risk on Top of Equity Exposure
If few U.S. investors would leverage up their S&P 500 exposure with a secondary bet on the U.S. dollar, why should it always make sense to layer on euro risk when buying European equities or yen risk when buying Japanese equities?
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