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The purpose of this research is to evaluate the foreign exchange risk exposure of listed companies on the Shanghai and Shenzhen Stock Exchange from iron and steel industry based on panel data over the period July 2005 to July 2008. The augmented Jorion Model is built to estimate the sensitivity of stock returns to exchange rate fluctuation. The findings are shown as follows: (1) Chinese iron and steel industry has significant exposure to foreign exchange risk, which is significantly exposed to USD and JPY, and is insensitive to EUR and HKD. (2) The appreciation of RMB-JPY adversely affects firm returns, while firms are benefited from the appreciation of RMB-USD. (3)The US dollar is the most dominant source of exchange risk among the major currencies, and Japanese Yen is the second one. (4) Affected by other factors except exchange rates and average stock market return, it has fixed effect.