Real value of the won falls…lowest level since the financial crisis

In October, the won's real value fell to its lowest level since the global financial crisis.

According to data from the Bank of Korea and the Bank for International Settlements (BIS) on the 23rd, South Korea's real effective exchange rate index stood at 89.09 at the end of October, down 1.44 points from a month earlier.

This is the lowest in 16 years and 2 months since it recorded 88.88 at the end of August 2009 during the global financial crisis. It is not much higher than at the end of November 1998 (86.63), when the country went through a foreign exchange crisis while receiving IMF bailout.

Also, in October, South Korea's real effective exchange rate was the third lowest among 64 countries included in BIS statistics, after Japan (70.41) and China (87.94). In particular, the decline in the real effective exchange rate during October was the second largest among the 64 countries, following New Zealand.

The real effective exchange rate shows how much purchasing power a country's currency has in real terms compared to other countries' currencies. A figure above 100 is considered overvalued compared to the base year, and below 100 is considered undervalued.

Meanwhile, the won·dollar exchange rate has surged to the point of threatening the 1,500-won level. According to the Seoul foreign exchange market, on the 21st, the last trading day of last week, the won·dollar exchange rate closed at 1475.6 won, up 7.7 won. This is the highest level since April 9, when the exchange rate reached this year's peak.

Hong Min-seong, Hankyung.com reporter mshong@hankyung.com