Economics Exchange Rates Questions
The impact of exchange rate changes on stock markets can be significant. When a country's currency strengthens, meaning its exchange rate increases, it can make the country's exports more expensive and less competitive in international markets. This can lead to a decrease in profits for companies that rely heavily on exports, which can in turn negatively affect their stock prices. On the other hand, a weaker currency, indicated by a decrease in exchange rate, can make a country's exports more affordable and competitive, potentially boosting profits for exporting companies and positively impacting their stock prices. Additionally, exchange rate changes can also affect the value of foreign investments and the overall sentiment of investors, leading to fluctuations in stock market performance.