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As the threat of a U.S. debt-ceiling crisis grows, and worries persist about the country's long-term fiscal outlook, some money managers are putting more of their cash and shorter-term assets into foreign currencies and bonds and financial advisers increasingly are telling their clients to do the same.

Although the dollar has enjoyed a 3.6% bounce over the past two months, many investors remain on edge over the greenback's prospects.

Fund managers, meanwhile, have been boosting their cash allocation, with global stock funds' cash reserves climbing to 3.7% at the end of May compared with just over 2% at the beginning of the year, according to EPFR Global. Some global fund managers say they are parking some of that cash in currencies other than the dollar.

Chuck de Lardemelle, co-manager of the $10 billion IVA Worldwide Fund, has moved roughly half of the fund's 20% cash position out of dollars and into the short-term sovereign debt of countries like Norway, Singapore and Canada. He says he has little faith in the prospects of the euro or yen because of fiscal issues in Europe and Japan.

While most foreign bonds are paying more than the meager rates on U.S. government debt, a richer yield isn't the primary motivation. Instead, these investors say they are looking for a way to protect the purchasing power of their investments if forecasters are right and the dollar ultimately weakens.

"We are not trying to make money off the strategy, but are looking at it as a way to hedge the inflation we believe is out there," says Paul Dietrich, head of wealth manager Foxhall Capital Management Inc. in Orange, Conn., which has assets of $890 million.

About half of the cash held in the $21 billion Loomis Sayles Bond Fund is parked in short-term Canadian debt. U.S. Treasurys essentially "offer no yield, face the expectation of rising rates and are volatile given all the uncertainty," says co-manager Elaine Stokes, while Canada has much-sought after commodities, stands to benefit if the U.S. economy does better and is positioned to have a stronger economy even if the U.S. recovery slows.

Given the near- and long-term concerns in the U.S., Barclays Wealth recommends that even conservative clients allocate 12% of their assets to non-U.S.-dollar-denominated assets.

While currency diversification has been a hard sell in the past for retail investors who often associate it with speculators financial advisers say clients have become more receptive recently as they digest the risks of owning only dollars and the impact that could have on living standards over time.

The strategy comes with its share of risk. The Canadian dollar fell more 4% against the U.S. dollar over the last two months, for example. And if global economic concerns mount, some currency strategists think the dollar could strengthen further as investors flock to safety over the near term.

But many fund managers see the dollar's recent gains as nothing more than a short-term reprieve. "We would rather sit in sound currencies whose banking systems are sound and are often backed by commodities," IVA's Mr. de Lardemelle says.

Harris Private Bank Chief Investment Officer Jack Ablin recommends high-net-worth clients allocate money they don't need for two or three years, rather than their emergency cash kitty, to foreign government bonds. Instead of thinking of these investments as rock-solid certificates of deposit, advisers recommend viewing them as short-term corporate bonds that could possibly lose or gain some money.

While some brokers like Charles Schwab (SCHW) Corp. offer access to the sovereign debt of developed nations like Australia, minimum investments can be steep: Schwab's is typically $100,000. As a result, some financial planners use broad currency and global bond funds like Templeton Global Bond, Pimco Emerging Local Bond or newer ETFs like WisdomTree Dreyfus Commodity Currency (CCX) . Some wealth managers also pool clients' assets to meet the minimums to buy these bonds at decent prices for clients.