The South Korean won's real effective exchange rate (REER) fell to 83.06 in June, marking its lowest valuation since March 2009, according to data released by the Bank for International Settlements (BIS) on July 24. The decline represents the fifth consecutive monthly drop from January's 87.02 level. The won's depreciation was driven by sustained foreign selling of Korean stocks amid a surge in the KOSPI index, with the dollar-won exchange rate reaching 1,559.20 won on the 1st of this month. The REER measures a currency's real value adjusted for inflation differences with trading partners, with values below 100 indicating undervaluation compared to the 2020 baseline.
BIS Data Shows Won at 15-Year Low
According to BIS data, the June REER of 83.06 represents the lowest level since March 2009, when it stood at 79.31 during the global financial crisis. The won has declined consistently from 87.02 in January through five consecutive months. The REER indicator accounts for price differences with trading partners to show a currency's real value, with readings above 100 indicating overvaluation and below 100 indicating undervaluation relative to the 2020 baseline period.
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Real effective exchange rate trend of the Korean won since 1994. Source: Bank for International Settlements (BIS)
South Korea Ranks Second-Lowest Among 64 Countries
Among 64 countries surveyed by BIS, only Japan recorded a lower REER than South Korea. Japan's REER stood at 65.30 in June, down from 66.03 in May. Following South Korea and Japan, Indonesia ranked third-lowest at 88.38, followed by India at 90.15 and China at 92.24. The United States recorded a REER of 107.84, indicating overvaluation relative to the 2020 baseline.
Won Expected to Recover in July on Improved Supply-Demand
The won's real value is observed to rebound significantly in July as exchange rate dynamics stabilize. This month has seen improved supply-demand conditions including SK Hynix American Depositary Receipt (ADR) funding conversion flows, forward selling by export companies, and reduced foreign net selling of Korean stocks. The dollar-won exchange rate has stabilized following these supply improvements after reaching 1,559.20 won on the 1st of this month.
FAQ
What was South Korea's real effective exchange rate in June?
South Korea's real effective exchange rate (REER) was 83.06 in June, according to Bank for International Settlements data released on July 24. This marked the lowest level since March 2009 when it was 79.31.
Why did the Korean won depreciate in June?
The won lost significant value in June due to sustained foreign net selling of Korean stocks following a surge in the KOSPI index. The dollar-won exchange rate reached 1,559.20 won on the 1st of this month as a result of these outflows.
How does South Korea's currency valuation compare internationally?
Among 64 countries surveyed by BIS, South Korea had the second-lowest real effective exchange rate after Japan (65.30). South Korea's 83.06 REER was followed by Indonesia (88.38), India (90.15), and China (92.24).
