Impact of Currency Exchange Rate

on the Stock Markets

Introduction
In this chapter a brief overview of the background of the study is given. The readers will also
find the research aim, objectives and the research question with which the present research
is carried out. Limitations of the study were also given before ending up this chapter with
the structure of the dissertation.

Research Background
The relationship between exchange rates and stock markets has received considerable
attention by economists. Both exchanges rates and stock prices play an important and
influencing role in the development of a countrys economy (Nieh & Lee, 2011).

The relationship between exchange rates and stock markets is an important issue to analyze.
Foreign investors and domestic companies may suffer a loss or a profit from changes in
exchange rates that may affect stock returns or the other way around.

The dynamic relationship between exchange rates and stock markets may be different in the
short-run and long-run and it may not be in line with the theory. The purpose of this
research is to critically assess the relationship between the exchange rate and the stock
market across the world.

Thus for this purpose, interviews and questionnaire surveys will be conducted. Stock market
brokers and investors will be consulted for collecting primary data on how the fluctuations
in currency exchange rates have impacted on their stock.

Research Aim :
The aim of this research is to critically assess the impact of fluctuations in currency
exchange rate on the stock market.

Objectives :
1. To identify the factors those are responsible for changes in currency exchange.
2. To examine the positive and negative impact due to changes in currency exchange on
stock prices, investors and stock markets.
3. To assess the possible tools and solutions for managing such impact
4. To assess the overall impact of fluctuations in currency exchange rates on stock markets.
5. To recommend investors and stock brokers for better risk management from impact of
currency exchange rates.

Rationale of the Study

Stock markets and the currency exchange share an interesting relationship. Both of these
can impact on the world economy. This research has been carried out to know the impact of
currency on the stock market.

It will also uncover the impact of ups and downs of stock market on the currency value. This
research is carried to know the underlying factors that can significantly impact on the
currency and stock market individually.

This research is carried out to know the role played by prominent currencies on the world
economy and also on the exports and imports. The relationship between the stock market
and the currency varies based on the economics status of the country.

This research reveals the varying effect of currencies and stock markets in developed and
developing countries. The impact of G3 (US dollar, Euro and Yen) currencies on the world
economy is also studied in this research.

Limitations of the Study

This study is simply focused on the relationship between the changes in currency
fluctuations and its impact on stock markets. This study only explains the reasons for
changes in the currency and stock markets theoretically. Statistical or any related models
are not used to prove the varying effect of currency on the stock markets. The primary
research is limited to the survey results with investors and stock brokers.

Structure of the Dissertation

The first chapter gives a brief detail about the overview of the research background and
research purpose. Research aim, objectives and limitations are also presented here.

The next chapter is the literature review. In this chapter, a review of literature and past
studies findings related to the changes in currency rates and its impact on stock markets will
be done.

The chapter three is research methodology. All the research methods used and their
importance will be mentioned in the Methodology chapter. The research onion given by
Saunders et al, will be used in this chapter to present this section.

Chapter four involves presentation of data collected through primary data sources and
analyzing its using qualitative and quantitative research methodologies.

In the fifth chapter the findings of the chapter four will be further discussed and are linked
and compared with the earlier research findings and literature.
The final chapter of this study is conclusion and recommendations in which based on
findings, concluding points will be given. Furthermore, some suggestions would be given to
the investors and stock brokers based on findings of this research.

Conclusion
This chapter has given only a brief overview of the research background and its purpose.
Only brief introduction is given on the currency rate fluctuations and its impact on stocks. A
detail review of literature and past findings will be done in the next chapter.