I invest mainly in Australia shares but want to get more foreign exposure. I have been warned by some people about exchange rate risk. Due to the rapidly rising Australian dollar, many overseas investments are doing very badly when converted back into Australian dollars. The way to fix this is to invest in a fund that engages in currency hedging. I am told however that investing in a fund that engages in currency hedging can be bad if the Australia dollar were to depreciate. So what do I do? Do I hold both hedged and unhedged international shares to diversify or do I pump all the money into the hedged fund because, since I already have lots of Australian shares, depreciating Australian currency will help Australian exports?