Exchange Rate
The exchange ratio between two countries' money — when the dollar strengthens against your home currency, the value of US stocks in your currency changes too.
In plain terms
The exchange rate is the ratio when swapping two countries' money. "USD/JPY 150" means buying 1 dollar costs 150 yen. When this number rises, the dollar has gotten more expensive (the yen weaker).
For an investor whose home currency is not the dollar, the exchange rate directly affects returns on US stocks. Even if a US stock is unchanged, a stronger dollar is a gain when converted to your currency, while a weaker dollar can be a loss.
What it tells you
The exchange rate is the result of two countries' rate differential, economic strength, and money flows colliding. When US rates rise above another country's, money crowds into the dollar and it strengthens (the rate rises).
For an investor outside the US, investing in US stocks is betting on two things at once — "that company's stock price" and "the exchange rate." So without knowing the exchange rate you understand only half your return.
Formula
exchange rate = the ratio when exchanging one country's money for another's e.g. USD/JPY 150 = it takes 150 yen to buy 1 dollar
What high or low means
When the dollar strengthens against your currency, the value of your US stocks in your currency rises; when it weakens, the opposite.
When the US raises rates or a crisis hits, the safe-haven dollar tends to strengthen, so reading the exchange rate with US rates reveals the flow.
Even if a US stock rises, your return in your own currency can be poor if the dollar falls as much. Conversely, even with the stock unchanged, a stronger dollar yields a currency gain. Always remember "stock return ≠ my return."
Exchange rates are very hard to predict. With too many variables (rates, trade, politics), betting on a direction is risky.
Exchange rates are macro. This term is background for understanding market news. (※ Our screen handles individual companies' SEC-filed financials.)
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Exchange and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.