How is currency related to stock market?

Answer 1

They aren't related in some ways but are very related in others. Below is a simplified explanation:

1) Currency is one part of the money supply and is directly controlled by the Federal Reserve.
2) The money supply in total (Currency plus Checking Accounts) is regulated by the Federal Reserve, and how the Federal Reserve regulates the money heavy impacts interest rates.
3) Interest rate changes (or the anticipation of interest rate changes) can impact the stock market and spending pattern on other alternatives.

Simple example: Say investors are looking to buy stocks, bonds or real estate. Changes in the interest rate could cause investors to switch money between investments. Now it gets a little more complex because many stimuli in the economy all are working at the same time. But suppose the Federal Reserve implement policies designed to raise interest rates and decrease the money supply. Higher interest rates might draw people to invest in bonds and move money out of stocks and out of real estate. Therefore the price of stocks and real estate, in general, go down. That is where we say, "The market is down." Decreasing the interest rates and increasing the money supply, generally cause the stock market to rise.

Remember currency is one part of the money supply.

My word of caution is don't assume this happens all the time. Other factors in the economy can offset or mitigate the response.

Answer 2

You need currency to buy stock. It is an exchange of one value for another. Ownership of currency and ownership in a company stock are similar forms of value. Government issues currency and companies issue stock. Both require faith.

Answer 3

Look up Foreign Exchange Market.

Answer 4

currency is money, and the stock market is all about money...
Hope this helps!