The stock value of a company will be affected by the changes in the real value of its local currency based on how much exchange rate exposure it has. The response of a company’s stock value in different scenarios is discussed below:

• Company earns material revenues in foreign countries or faces international competition domestically and has primarily domestic costs.

• Negative correlation with movements in the real values of local currencies in the international currency markets.

• Local currency exposure value is negative.

• Company earns material revenues domestically, but costs are mostly incurred in foreign currencies.

• Positive correlation with movements in the real value of local currencies in the international currency markets.

• Local currency exposure value is positive.

• Company earns revenues domestically and incurs costs domestically with no international firms.

• Zero correlation with movements in the real value of their local currencies in international currency markets.

• Local currency exposure value is zero.