S. Korean currency's real effective exchange rate drops to lowest level since 2009
Seoul, July 26
The Korean won's real effective exchange rate fell to its lowest level in more than 17 years in June as the US dollar remained broadly strong, data showed on Sunday.
According to the Bank for International Settlements (BIS), the won's real effective exchange rate (REER) stood at 82.99 in June, down 1.75 points from the previous month.
The June reading was the lowest since March 2009, when the REER stood at 79.31 in the aftermath of the global financial crisis, reports Yonhap news agency.
The BIS' REER measures a currency's value against those of major trading partners after adjusting for inflation, serving as a gauge of international price competitiveness.
The decline in the REER came as the won weakened sharply against the U.S. dollar, hitting 1,555 won per dollar in intraday trading on June 30, its weakest level in more than 17 years.
The currency came under pressure from heavy foreign selling of South Korean stocks and strong dollar demand from domestic investors.
The won averaged 1,527.95 against the U.S. dollar in June, its weakest monthly average since February 1998 during the Asian financial crisis.
Earlier, Seoul stocks snapped their three-day winning streak to plummet nearly 6 per cent on Friday, as escalating tensions in the Middle East sapped risk appetite. The local currency rose against the greenback.
The benchmark Korea Composite Stock Price Index (KOSPI) fell 406.27 points, or 5.72 percent, to 6,690.62 after falling as low as 6,650.41.
The sharp decline triggered the country's bourse operator to suspend program trading for five minutes in early trading.
Trade volume was moderate at 395.1 million shares worth 30.9 trillion won (US$21.1 billion). Losers outnumbered winners 582 to 301.
Foreigners and institutional investors were net sellers, offloading a combined net 5.2 trillion won. Retail investors snatched up 5.18 trillion won.
— IANS
Reader Comments
17-year low! That's serious. As an Indian who follows currency markets, I see parallels with our own challenges. The won falling to 1,555 per dollar is alarming – reminds me of 2013 taper tantrum days. But Korea has strong fundamentals – they'll bounce back. Meanwhile, we should watch RBI's moves on the rupee carefully. 🇮🇳
Interesting data from BIS. The REER drop to 82.99 suggests Korean goods are becoming cheaper for foreign buyers – that could boost exports eventually. But the short-term pain is real. South Korea's stock market nosedive and institutional selling are worrying signs. Global investors are clearly risk-averse right now.
KOSPI dropping 5.72% in a single day is brutal! Retail investors buying the dip while foreigners and institutions sell – reminds me of classic market dynamics in India too. Middle East tensions are adding fuel to fire. Having lived through 2008 crisis, I hope policy makers take preemptive steps. Stability is key for growth.
The won's weakness is largely dollar-driven, but the REER metric tells us about trade competitiveness. For Indian exporters competing with Korean goods in sectors like electronics or automobiles, this could mean tougher price competition. We need to monitor our own currency management strategies to stay competitive.
Seoul stocks plummeting nearly 6% – that's worse than our Sensex drops on bad days! The foreign selling pressure is a global phenomenon, but Korea's heavy reliance on exports makes it more vulnerable. As an Indian, I feel for Korean investors. Markets are really volatile these days. Hope peace in Middle East helps calm things
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