SEOUL, October 26 (AJP) -South Korea’s nominal effective exchange rate has climbed to its highest level in about two years as booming exports and a large current account surplus underpin the won’s recovery.
The won’s trade-weighted nominal exchange rate index reached 94.83 on Oct. 20, according to latest Bank for International Settlements posting. That was its highest reading since Oct. 9, 2024, when it stood at 94.91.
The index measures the won against a basket of trading partners’ currencies, with 2020 set at 100. A higher reading indicates a stronger won.
The recovery has gathered pace as surging semiconductor shipments bolster export earnings.
Exports more than doubled from a year earlier to $61.6 billion in the first 20 days of October, generating a trade surplus of $14.5 billion, according to the Korea Customs Service. Chip shipments accounted for $27.5 billion, or nearly 45 percent of the total.
The Bank of Korea said in its Oct. 22 policy statement that the won had strengthened substantially despite a stronger U.S. dollar, helped by improved foreign-exchange supply and demand stemming from the country’s large current account surplus.
The BIS daily nominal index has rebounded 17 percent from its June 5 low of 81.03. On a monthly average basis, it rose from 81.99 in June to 84.67 in July, 89.15 in August and 91.99 in September.
The turnaround is also evident in the bilateral exchange rate. The dollar averaged 1,528.0 won in June before falling to 1,488.9 won in July, 1,404.4 won in August and 1,358.8 won in September.
Through Oct. 23, the monthly average stood at 1,337.2 won, its lowest since September 2024.
The won’s recovery remained pronounced after adjusting for differences in inflation between South Korea and its trading partners.
Its real effective exchange rate index rose 3.2 percent from August to 92.73 in September, the highest since November 2024. It marked a third consecutive monthly increase and an 11.7 percent rebound from June’s 83.03.
BOK Governor Shin Hyun-song observed during Thursday’s policy briefing that the won was still weak by historical standards despite its recent appreciation.
“With the dollar having been strong over the past few years, it is important to look at the BIS effective exchange rate, which takes trading partners’ weights into account,” Shin said. He cited an August reading of around 89, below an average of about 101.
BIS cautions that an index below 100 does not itself establish undervaluation as it measures a currency’s change against the basket relative to the base year.
The dollar was trading at 1,326 won as of 7:30 a.m. Monday.
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