And a more serious drawback, seen in Thailand, is that by appearing to eliminate currency risk a fixed rate encourages firms and banks to borrow heavily in foreign currency at cheaper interest rates than on domestic funds.

ECONOMIST: Getting out of a fix

In the trading strategy that has apparently been at the center of the moves over the past week, foreign funds seem to have been hedging their currency risks when making their initial share purchases by selling yen in the foreign-exchange market.

WSJ: 5.2% Drop Takes Tokyo Stocks Into a Correction

Thailand, Argentina and Russia have all faced financial crises as a result of foreign investors (largely American hedge funds) selling their currency en-masse.

CENTERFORSECURITYPOLICY: Peace through strength in a globalized world

Most ETFs and mutual funds that invest in foreign stocks or bonds do not hedge currency movements.

FORBES: Trade Currencies Like Soros

Countries with plenty of reserves, such as China or India, could allow mutual funds (domestic or foreign) to issue shares in domestic currency with which they could buy foreign exchange from the central bank.

ECONOMIST: Charting a different course | The

Special Offer: Trade foreign currency proxies, specific emerging markets and even global income securities with ETFs and closed-end funds.

FORBES: Euro Weakens As Bailout Fever Grips Europa From Iberia To Italia

The Polish currency is likely to rise further due to Poland's relatively sound economy, the inflow of foreign funds, and the market continuing to expect more cuts to borrowing costs than the central bank is ready to deliver, said Nomura economist Peter Attard Montalto.

WSJ: Poland Hints at End to Rate Cuts

Should the dollar regain momentum, the currency differential that juiced foreign indexes will work in reverse, and U.S. investors riding high on overseas funds could get hammered.

FORBES: Riding the Dollar