NEW YORK (MarketWatch) — As the dollar appears to once again be racing to new heights against the euro, Mohamed El-Erian, chief economic adviser at German insurance giant Allianz, says investors should try to benefit from its surge higher.

El-Erian recommends keeping bets small — and having plenty of cash on hand to take advantage of massive dips.

The strong dollar DXY, +0.03% will likely create headwinds for U.S. and emerging-market companies, El-Erian said Monday in a column in the Financial Times, a phenomenon he refers to as “financial breakage.”

U.S. companies will find it harder to compete with rivals in Europe and Asia, while the U.S. economy remains too weak to stomach such setbacks.

Companies based in emerging-market economies that are overexposed to dollar-denominated debt are likely headed for a rough patch -- but, as El-Erian notes, central banks can use their balance sheets to protect these companies from default.

Positioning should be balanced, El-Erian argues, “combining exposures that favour the dollar versus other major currencies (particularly the euro_ with hedged European versus U.S. equities positioning and, on the government bond side, U.S. bonds versus German bonds.”

And bets on emerging-market assets should be reconfigured to focus on countries with large amounts of foreign currency reserves and limited dollar-denominated debt.

In a time of such intense foreign-exchange volatility, keeping a substantial amount of cash on hand would be a smart move.

“After all,” El-Erian said, “we should never forget the growing phenomenon of limited liquidity provision during periods of greater market volatility. And volatility is what awaits markets.”