As far as the stock market is concerned, there are two main strategies for dealing with a rising currency:
1. try to make currency work to your advantage
Profit growth will be highest for a company in a changing currency environment if it has its costs in weak currencies and its revenues in strong ones. In today’s world, this means having costs in, say, yen or euros and sales in the US.
The “good” stocks in weak currency countries gain in two ways: from stronger profit gains and from domestic portfolio managers rotating their holdings toward the “good” industries.
The obvious candidates are export-oriented firms with high labor content in weak currency countries. In these areas, firms with high strong-currency import content that sell finished products into the domestic market are the worst ones to hold.
In strong currency countries, in contrast, purely domestic stocks are the best bet. They benefit only from portfolio manager rotation, though. But they avoid currency induced weakness.
2. ignore currency and look for secular growth names whose expansion prospects outweigh possible currency losses
As a growth investor, this is my preferred strategy. Historically, the majority of such stocks have been in the US. In today’s world, however, the ideal investment would be in a hot EU tech company with exposure to the US.