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Paulsen: I'm investing against strong-dollar theme

Many investors are betting on continued dollar strength, but Jim Paulsen, Wells Capital Management chief investment strategist, said Wednesday he's not one of them.

"One of the most widely accepted market themes right now that everyone playing is the dollar is going to keep going higher," he told CNBC's "Squawk on the Street." "That, to me, creates a huge risk if it doesn't go higher. I would invest against that trend and stay away from that risk."

The dollar has appreciated more than 18 percent against a basket of other currencies in the last year. Paulsen recently told CNBC he believes the dollar has been in "peaking mode" since March.

Read More Paulsen: 'Excellent chance' of commodity climb if dollar falls

He advised looking beyond the United States, where interest rates remain low and stocks have been beaten up relative to U.S. equities, making them better values.

"I'd go to parts of the world outside the United States that don't face the same problem we do, that is the need to raise rates," he said.

In a research note, Paulsen said the dollar strengthened amid weakness overseas. He told "Squawk on the Street" that what drives currencies is the growth gap between the U.S. and the rest of the world, which has widened in the last year.

"China is pushing up. Europe's pushing up, and we're going the other way," he said. "They might still be growing slowly overseas—I think they will—but the relative gap will close, which could bring a bid to foreign currencies and a sell to the dollar."