Question

How does currency depreciation affect stock market?

Answer 1

We study local stock market reaction to currency devaluations by a country's central bank. ... On average, the dollar value of the equity market declines by less than the currency devaluation, and devaluations typically have a more negative effect on developing country stock markets.

Answer 2

The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.Apr 7, 2018