NEW YORK —  International exchange-traded funds have been strong performers this year, and their investors owe a debt of gratitude to the weakening dollar.

The strength of foreign currencies against the U.S. dollar has often contributed as much to the performance of foreign-stock ETFs this year as has the strength of foreign companies.

It's been a good ride, but it may be time for investors to take a look at how much in international ETFs they want to hold. Owning some international stocks can smooth out a portfolio's performance in the long run. But investors who wouldn't be comfortable taking a rider on the price of the euro or pound might think twice about staying heavily invested in international ETFs _ or trying to dart in and out of them.

"Most, if not all, international ETFs are unhedged," says Andrew Clark, an analyst at Lipper Inc., meaning the funds don't take steps to limit the swings of currencies.

Long-term investors should see the trends even out, but "if you are too short-term you can get whipsawed by currency shifts," he says.

ETFs resemble index-oriented mutual funds but trade on an exchange like a stock.

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The funds have made it easier for Main Street investors to trade international stocks. Alternatives such as mutual funds usually discourage rapid buying and selling, and American Depositary Receipts, which represent shares of individual foreign companies, require large sums for proper diversification.

Given the strong returns of foreign investments, investor money is pouring into international ETFs and into "global" ETFs, which invest in the U.S. and abroad. Assets grew 46 percent to $95.3 billion from $65.2 billion during the first 10 months of year, according to the Investment Company Institute, the trade group for mutual funds and ETFs.

The largest international ETF is Barclays PLC's $31 billion iShares MSCI EAFE Index Fund, which follows the Morgan Stanley Capital International Europe, Australasia, and Far East index.

Year to date through Nov. 28, the EAFE index was up 17.4 percent in dollar terms but had gained only 7.9 percent in local currencies.

A Barclays spokesman noted a recent research paper by the firm which states that investors are "openly exposed to fluctuations in both local equity and currency returns" and benefit from a "thorough understanding of the source and correlations of these exposures."

Two ETFs, Barclays' iShares MSCI Emerging Markets Index Fund and Vanguard Group Inc.'s Emerging Markets ETF, track the MSCI Emerging Markets index, which has returned an eye-popping 26.9 percent so far this year in dollars, but a smaller 13.8 percent in local-currency terms.

The results are similar for ETFs by those firms' main ETF rival, State Street Corp. The Dow Jones Euro Stoxx 50 Index, the basis for a State Street "StreetTracks" ETF, is up 23.8 percent year to date through Nov. 28, calculated in dollar terms, and 11.1 percent in euro terms.

What's giving extra juice to these funds and the indices they track is the beleaguered U.S. dollar, which recently hit a 20-month low against the euro and a 14-year low against the British pound.

The weak dollar boosts the U.S. value of overseas assets, and stocks are no exception. But the direction of the dollar can quickly change.

"Currency can dominate returns for U.S. investors," said Dodd Kittsley, director of ETF research at State Street Global Advisors. While U.S. investors have benefited this year, "it could swing the other way."

Vanguard recently published a research paper noting that currency movements cut close to 20 percent from 12-month returns of international stocks in 1984, then turned around the next year and added more than 30 percent in 1985-1986.

"If you look at international stocks as a class and measure the returns versus U.S. stocks, they will demonstrate higher volatility," said Paul Lohrey, a principal in the quantitative equity group at Vanguard.

Of course, that doesn't mean investors in U.S. stocks don't sometimes feel currency fluctuations too. Large U.S. companies like Coca-Cola Co. and International Business Machines Corp. generate more than half their revenue abroad. But while exchange rates do affect earnings, day-to-day stock-price movements tend to reflect overall company valuations.

Adding some overseas holdings to a U.S. investor's portfolio can dampen its overall volatility. How much in foreign stocks should U.S. investors own? Different investors come up with different answers, but one Vanguard study suggests investors may find the best balance between benefits and risks by putting 20 percent to 40 percent of their stock portfolios in overseas companies.

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