Living between France and the United States naturally means being exposed to two currencies. Even so, currency risk is often misunderstood. It is regularly viewed as a central risk, when it should be analyzed as part of a broader picture: taxation, returns, and wealth structuring. The question, therefore, is not whether the dollar will rise or fall, but how to integrate this exposure into a coherent wealth strategy.
1. Currency risk exists, but it is not always decisive
A French person living in the United States generally builds wealth in dollars: income, financial assets, real estate, equity in a company. As soon as a euro-based project arises, a return to France, retirement, wealth transfer, exposure to the EUR/USD exchange rate materializes.
However, this risk often remains secondary compared with other factors. Differences in taxation between the two countries can have a much more significant impact on net returns.
The France-U.S. tax treaty helps avoid double taxation in many cases, but it also creates complex trade-offs that must be factored in upfront.
Source: https://www.impots.gouv.fr/les-conventions-internationales
A decision based solely on currency exchange can therefore lead to suboptimal choices if it worsens taxation or overall performance.
2. Full repatriation: rarely an optimal approach
A common reaction is to want to convert all of one’s wealth into euros in order to “secure” the situation. In practice, this approach is rarely optimal.
It can limit access to certain investment vehicles, trigger less favorable taxation, and reduce long-term return potential. U.S. markets have historically delivered stronger equity performance, which remains a structuring factor in an international allocation.
Source: https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview
The logic, then, is not to choose between the United States and Europe, but to build a balanced allocation.
3. A pragmatic approach: a euro safety cushion
Rather than trying to fully hedge currency risk, a more effective approach is to reason based on needs.
Keeping part of one’s wealth in euros helps secure short- and medium-term expenses. In many cases, this represents one to three years of expenses, or even more for more cautious profiles.
This euro cushion could helps smooth out currency fluctuations, avoid unfavorable conversions, and secure the necessary liquidity. The rest of the wealth can remain invested with a long-term perspective, without depending on the exchange rate level at the time of transfer.
4. Hedging currency risk: a contextual decision
Hedging currency risk can be relevant in certain situations, especially in the event of a short-term return or an identified need in euros.
It mainly depends on the investment horizon, the currency of future expenses, and the level of tolerance for volatility. Solutions exist, but they come at a cost and can reduce performance.
In many cases, indirect hedging through diversification or a partial allocation in euros is sufficient. The goal is not to eliminate risk, but to make it acceptable within a broader strategy.
5. Investing in Europe: an opportunity that must be framed
A strong dollar can make European assets more accessible. This can create opportunities, particularly in real estate or direct investments.
However, certain European financial investments create constraints for profiles with U.S. tax ties. The rules relating to Passive Foreign Investment Companies (PFICs) can lead to punitive taxation and significant reporting complexity.
Source: https://www.irs.gov/instructions/i8621
These elements must be analyzed before making any allocation outside the United States.
6. A strategy that depends on tax status
Managing currency risk depends heavily on the investor’s status.
A U.S. citizen or green card holder will generally benefit from maintaining significant exposure to U.S. assets, with heightened vigilance regarding foreign investments.
Conversely, a French person planning a long-term return to France may gradually redirect their allocation, with more active currency management.
There is therefore no one-size-fits-all solution, only strategies tailored to each situation.
7. Maintaining a disciplined approach
Currency fluctuations are part of a broader environment of volatility. Historically, financial markets have gone through major economic cycles while maintaining long-term performance.
Source: https://www.spglobal.com/spdji/en/research-insights/sp-500-historical-returns/
In this context, it is essential to avoid emotional decisions driven by short-term movements. A structured allocation, aligned with one’s objectives and risk profile, remains the main driver of performance.
Conclusion
Currency risk is a reality for investors between France and the United States, but it should not be isolated from the rest of the wealth strategy.
Taxation, returns, and structuring generally have a more decisive impact on overall performance. The challenge is not to predict the evolution of the dollar or the euro, but to build wealth capable of absorbing these variations over time.
Adrien Eyraud
Partner – USA France Financials Group™
Future written communications may be in English only. This material is provided for educational purposes only and is not intended as specific advice or tax advice. Laws are subject to change, and individuals should consult with a professional regarding their specific circumstances.
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