The fund manager should cut the EUR position and add the CAD position. The reason for this is that the marginal Value at Risk (VaR) for EUR is higher than the marginal VaR for CAD. Marginal VaR is a measure of the risk of loss in the value of a portfolio due to a small change in a particular asset's position. In this case, the marginal VaR for EUR is 0.1521, while the marginal VaR for CAD is 0.0528. This means that a small change in the EUR position would result in a larger potential loss compared to a similar change in the CAD position. Therefore, by reducing the EUR position and increasing the CAD position, the fund manager can reduce the overall risk of the portfolio. This strategy is based on the principle of diversification, which aims to reduce risk by spreading investments across different assets. By allocating more of the portfolio to the asset with the lower marginal VaR (CAD), the fund manager can achieve a more balanced and less risky portfolio.

Choice A is incorrect. Cutting the CAD position and adding to the EUR position would increase the portfolio's risk, not decrease it. This is because the marginal VaR of EUR (0.1521) is higher than that of CAD (0.0528), meaning that each additional unit of EUR added to the portfolio increases its risk more than an equivalent unit of CAD.

Choice C is incorrect. Adding both CAD and EUR positions would also increase the portfolio's risk, as both assets have a positive marginal VaR. The objective here is to minimize risk, not increase it.

Choice D is incorrect. Doing nothing or adopting a strategy other than cutting down on higher-risk assets (in this case, EUR) and increasing lower-risk ones (CAD) will not help in minimizing portfolio risk.