This study provides new evidence on the presence of foreign exchange exposure and foreign exchange risk premia. The results challenge the conclusions of earlier studies which find such exposure insignificant and unpriced. Making no prior assumptions regarding the types of firms exposed to exchange risk and using an APT specification designed to 1) satisfactorily span the domestic factor space, and 2) explicitly incorporate the covariability of exchange rate innovations, we find evidence both of foreign exchange exposure and priced foreign exchange risk premia.