Not seeing this talked about enough and would like to share my thoughts on this. Currency return is a part of investment performance for overseas investments, if unhedged. If they move in tandem with the market, investments becomes more volatile, and more stands to be lost that one would expect.
Take the recent U.S. market, for example. In the last couple days, the dollar has depreciated just about as much against the Euro as the market has fallen. For an European investor, the losses in the U.S. market would have amounted to 10% instead of just 5%. Of course, this can also work to one's advantage when the market is up. There is some empirical evidence that the U.S. market and the dollar value is positively correlated (presumably due to the demand and supply mechanism of global capital markets).
As more and more retail investors consider rotating out of U.S. equities into EU, I think this is an important reminder to consider hedging currency returns, if this factor to be eliminated. There is no reason to assume that the Dollar would not recover some grounds against the Euro when the dust settles.
Happy to listen in to everyone's opinion on this. Did you rotate into Euro investments with a currency hedge?