We document that there is a (re)connection between exchange rate movements

and relative changes in aggregate quantities, such as consumption and output growth, once wealth changes are controlled for. After controlling for these wealth effects, the conditional correlation between exchange rates and macroeconomic quantities becomes negative, as predicted by risk-sharing models. We find that relative wealth changes positively correlate with aggregate macroeconomic quantities. We interpret this as an indication that the economic forces driving these patterns are imperfectly shared productivity shocks. These observations motivate our analysis of how technological innovation affects exchange rate movements. We introduce a minimal deviation from the standard endowment economy model of exchange rate: in an economic boom, new firms are created, but they are randomly distributed to a small part of the population. Our calibrated model does a good job replicating key features of the data, specifically, the joint dynamics of exchange rates, stock returns, real output and consumption growth, and trade flows.