This study analyzes the effect of the competitive effect of relative exchange rate fluctuations on the value of exporting firms, which had not been considered in prior research, using a residual demand model. In particular, the study demonstrates that in determining the mark-up rate representing competitive relationships in export markets, the effect of exchange rate fluctuations between the domestic currency and the export market currency cancel each other out in the profit maximization process and have no effect, while only the relative exchange rate of competing firms in the export market plays an important role. Using these results, the competitive effect—specifically the mark-up rate—can be separated from the total exchange rate risk in firm value, and the competitive effect can be expressed as a function of the relative exchange rate of competing firms. The conclusion in prior research that "the exchange rate risk exposure coefficient is not statistically significant" should not be interpreted as indicating that exchange rate risk has no market value; rather, it should be interpreted as a mis-specification of the explanatory variables representing the market value of exchange rate risk. In the relationship between exchange rate risk and firm value, the conversion and contractual effects of current and past exchange rate fluctuations manifest differently depending on the exporting firm's hedging ratio elasticity.