As part of its asset allocation strategy, the XYZ Global Fund considers the effects of currency fluctuations on its portfolio returns. The fund holds a significant portion of its assets in non-U.S. equities, translating to exposure to multiple foreign currencies. Recent economic shifts have raised concerns regarding the volatility of these currencies. The portfolio manager is evaluating three different currency management strategies.

Strategy 1 involves entering into forward contracts to hedge the currency exposure associated with the foreign equities. Strategy 2 aims at gaining exposure to foreign currencies by investing in currency ETFs, which move in tandem with the foreign currencies. Strategy 3 uses a passive management approach by maintaining the fund's currency exposure and focusing on asset allocation only. Which strategy is most effective in reducing currency risk while maintaining potential investment returns?