Related: Europe ETFs Can Catch Up to U.S. Rally

However, there is a risk of a sharp USD appreciation. For instance, U.S. tax reform or deficit financed tax cuts could trigger U.S. Treasury issuance and growth, which would lead to higher interest rates and a quicker appreciation of the greenback.

Consequently, ETF investors seeking international exposure should consider currency-hedged strategies that allow investors to capture upside potential in the global markets while hedging against potentially weakening international currencies or a stronger U.S. dollar.

For instance, the depreciating JPY has allowed currency-hedged Japan ETFs to outperform their non-hedged peers. For instance, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ), iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) have been go-to options to access Japanese equities markets while hedging against foreign exchange risks.

Meanwhile, investors who believed the euro currency could weaken after its recent rally and are bullish on the broader Eurozone turned to the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ).

For more information on international currency hedged strategies, visit our currency hedged ETFs category.