Answer
The risk decreases because the summation of squares in the risk formula (standard deviation of rate of return) decreases.
Work Step by Step
Because the mean rate of return (reward) is a number between the rate of return in the U.S. and the foreign rate of return. At first, it moves from the rate of return in the U.S. to the foreign rate of return. This way, the risk decreases because the summation of squares bellow decreases.
$Risk=\sqrt {\frac{(rate~of~return_{U.S.}-reward)^2+(rate~of~return_{foreign}-reward)^2}{2}}$
