How does the exchange rate impact stock prices?

When a country’s currency is weakened, its exported goods become cheaper internationally, which can help to fuel growth and lead to a potential increase in profits for companies whose earnings are export-based. But when a country’s currency declines in value, the purchasing power of the currency also drops. It will cost manufacturers more to buy their materials, which puts pressure on their profit, and ultimately their stock prices. In the long run, currency appreciation usually has a positive impact on the stock market.