With all the talk of a continued rally in the U.S. dollar, U.S. investors interested in buying overseas are probably thinking a lot more about currency risk, which can be at least as big a factor in your foreign investment success or lack thereof.

As an example, let's look at a leading Canadian phone company, Telus (TU [1]), which is easy to isolate because it has shares which trade in Toronto as well as here in the U.S., so currency differentials are easy to see.

Telus in Canadian dollars:

Telus in U.S. dollars:

(stocks above courtesy of stockcharts.com [2]) 

While 2007 was quite a volatile year for the stock and Canadian investors ended up with a loss of nearly 10%, U.S. investors actually realized a gain of 6.5% due to dramatic Loonie strength vs. the Greenback last year. In an environment in which foreign currencies are falling against the U.S. dollar, however, it becomes harder for Americans to make headway overseas because gains in the underlying stocks have to outpace declines in their respective currencies.

A possible solution? Hong Kong. Not only does it serve as the financial gateway to China-- and will for the forseeable future-- but its dollar is still pegged to ours, the only major, western-ized stock market for which this is true today. Investors looking for international exposure but worried about the effects of a possible U.S. dollar rally might want to look here first.