How does the exchange rate affect the balance of trade?

Answer 1

If by that you mean what happens if one country's currency appreciates relatively to the rest of the world, then country's exports sell less (because they become more expensive for the foreigner), while its imports increase (because they are cheaper now for the domestic consumer); thus the balance of trade is decreased (because the country is spending more on imports relative to its sales of exports).

Answer 2

As a country's exchange rate declines relative to other currencies the cost of its exports declines which typically increases demand for its products by other countries resulting in a positive trade balance. A weak currency also helps a nation achieve a positive trade balance since the cost of imports will increase thus decreasing demand for foreign products by its citizens.