Won's real effective exchange rate weakens to 17-year low as external pressures mount
Published: 27 Apr. 2026, 09:48
Updated: 27 Apr. 2026, 10:11
![An employee sorts 50,000-won banknotes at a Hana Bank in Jung District, central Seoul, on March 24. [NEWS1]](https://koreajoongangdaily.joins.com/data/photo/2026/04/27/1ef3626e-2f6b-4859-b596-2871c0d58e26.jpg)
An employee sorts 50,000-won banknotes at a Hana Bank in Jung District, central Seoul, on March 24. [NEWS1]
The won’s real effective exchange rate (REER) fell to its lowest level since the 2008 global financial crisis as rising oil prices and higher import costs linked to tensions in the Middle East weigh on the currency.
The REER index for Korea stood at 85.44 at the end of last month, a drop of 1.57 points from the previous month, the Bank for International Settlements (BIS) and the Bank of Korea said on Sunday. That is the lowest level in roughly 17 years since March 2009, when it stood at 79.31.
Korea's index ranking was the third lowest among the 64 countries surveyed by the BIS at the end of last month, behind Japan at 66.33 and Norway at 72.7.
The REER is an indicator of a currency's relative purchasing power, calculated by factoring in inflation and trade weights. It is benchmarked against the average value of all currencies in 2020, set at 100, with a lower index indicating that the currency is undervalued in international markets.
The REER of the won has been rated lower than the Chinese yuan for five consecutive months since October last year.
Korea's REER fell to 91.37 in December 2024, immediately after the swift emergency martial law declaration, when the won-dollar rate broke through 1,480 won. It then fluctuated around the 90 mark as uncertainty over U.S. tariff policy, a surge in retail investment in overseas stocks and increased liquidity from expansionary fiscal policy compounded the pressure. The won slid further when conflict broke out between the United States and Iran at the end of February last year.
"Korea is heavily dependent on energy such as oil and gas, and its foreign exchange market is relatively small, making it highly susceptible to external factors," said Yang Jun-sok, a professor of economics at Catholic University of Korea. "Raising the real value of the won requires not only short-term exchange rate defense but also measures such as supply chain diversification and deregulation of the foreign exchange market."
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM SEON-MI [[email protected]]
with the Korea JoongAng Daily
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