According to Ajayi and Mougoue, they explore the short-and long- run relationship between the exchange rates and prices of stock. The most interesting fact is related to the outcomes on short run impacts in the Canadian markets. They find that an increase in the prices of stocks causes the deterioration of the currency for Canadian Security Markets. It is also clarified that with the rise in the stock market is, there is an indication of an expansion within an economy, which runs together with the expectation of higher inflation. Many foreign shareholders and investors make a perception of the rise in the inflation contrarily. Their demand for the coin drops and hence there is a depreciation for it then(Kutty, 2010).In accordance with the effect of currency on the stock market, several researchers find that the depreciation of currency prompts a decrease in the prices of stocks in the short run, likewise consistent with what is mentioned above. Several authors also clarify this negative relationship which indicates that with the depreciation of the exchange rate, there is a higher expansion later on, which makes investors doubtful about the performance of organizations in future. Thus, there is a drop in the stock prices.
The relationship between the exchange rate and the stock market has drawn the consideration of financial specialists and policy makers alike, basically on the grounds that they both assume critical parts in impacting the advancement of a nation’s economy. This relationship has been used by fundamentalist speculators and other policy makers to anticipate the future patterns for one another, and has been seen as an important device. Then again, recent studies have observed that there is no co integration between the two variables within the long run.The currency of a nation can get to be more profitable in connection to whatever remains of the world in two fundamental ways: when the measure of the units of currency that is available within the world place for market is decreased (for instance, when the Fed expands the rates of interest and reasons a decrease in spending), or by an increment in the interest for that specific currency. The way of relationship between exchange rates and stock prices has been a subject of extensive consideration among the various academicians and policy makers (Hashimoto, 2009).