The paper investigates the dynamic linkages between exchange rate volatility and stock returns volatility of Pakistan, India and China for the period of 2007 to 2012 by employing daily data. GARCH model is applied to extract volatility of exchange rate and stock returns. The Johansen Co-integration test and granger causality approach is applied to investigate the dynamics of relationship of exchange rate and stock returns volatility. The results implied that there is little evidence for the co-integration relationship between exchange rate and stock returns volatility for all the countries of the sample. Furthermore, the granger causality test also confirmed that there is no causal relationship between exchange rate and stock returns volatility for India and China but for Pakistan where we are unable to reject the null hypothesis that the exchange rate does not granger cause KSE stock returns volatility. Key Words: Co-integration, Granger Causality, Volatility, Stock Returns, Exchange Rate.