SEOUL, November 23 (AJP) - The South Korean won’s real value has slipped to its lowest point, risking the deterioration of Korea's purchasing power in global trade.
Data from the Bank of Korea and the Bank for International Settlements showed that the country’s real effective exchange rate — or REER — stood at 89.09 at the end of October against the reference year of 2020 as 100. The index was down 1.44 points from a month earlier and marked the lowest reading since August 2009. It is even below the 89.29 in March amid political uncertainty due to presidential impeachment following a short-lived martial law declaration.
The REER measures a currency’s real purchasing power compared with those of major trading partners. A reading below 100 indicates the currency is undervalued relative to the base year.
The decline in the won’s real value reflects broader global currency trends. A strong U.S. economy has kept the dollar firm, while the Japanese yen and Chinese yuan have weakened, putting additional pressure on the won. South Korea’s REER, which was above 100 in 2020 and 2021, has steadily fallen and dipped below 95 in the second half of last year.
The U.S. dollar has spiked this month amid heavy foreign stock selling to near 1,500 won. It climbed to 1,476.0 during Friday trading, the highest since early April, when it briefly hit 1,487.6. Unlike the sharp but short-lived jump in April, recent movements have shown a gradual upward trend.
Analysts say stronger demand for the dollar — partly due to increased investment in the U.S. stock market — and delayed currency conversion by exporters are contributing to the won’s structural weakness. Market watchers believe government intervention alone won't be able to reverse the trend, projecting that the exchange rate is likely to remain in the 1,400 range per dollar well into next year.
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