The Impact of Exchange Rate Changes on Stock Price

There is a closed relationship betweenforeign exchange market and stock price. Generally speaking, if a country's currency is the basic policy of appreciation, the stock price will rise, andonce its currency depreciates, the share price will fall. So, the foreign exchange market will bring a great impact on the stock market.

In the trend of the rapid development of international trade, the influence of exchange rate on a country's economy isgrowing. The economy of any country is affected by the change of exchange rate to some extent. Moreover, the impact of exchange rate changes on a country's economy depends on the degree of its openness to the outside world. With the continuous improvement of the openness of various countries, the impact of exchange rate on the stock market is also expanding. The most direct one is theimpact on import and export trade. Most of the domestic currency appreciation benefits from the import industry, that is, enterprises relying on overseas supply of raw materials. On the contrary, the export industry is losing money because of its lower competitiveness. But when the domestic currency depreciates, the opposite is true. However, both appreciation and depreciation have their own advantages and disadvantages on the company's performance and the economic situation. Therefore, it is too simple to buy or sell stocks onlyby the rise and fall of exchange rate.

The most direct impact of interest ratechanges on stock prices is that of companies engaged in import and exporttrade. It is reflected in the stock price by affecting the company's business and profits:

(1) If the company's products are sold inoverseas markets, when the exchange rate increases, the competitiveness of theproducts in the overseas market will be weakened. Therefore, the company's profitability will decline and the stock price will fall.

(2) If some of the company's rawmaterials rely on import, and the products are mainly sold abroad, the increaseof exchange rate will reduce the cost of imported raw materials and increasethe profit, thus making the company's share price tend to rise.

(3) If it is predicted that the exchangerate of a country will rise, the monetary funds will rise and transfer, andsome of them will enter the stock market, and the stock market may also rise accordingly.

Therefore, investors can make a correct investment choice according to the above general effects of exchange ratechanges on stock price and other factors.