Korean won’s nominal effective rate rises to 2-year high

The Korean won’s nominal effective exchange rate rose to its highest level in about two years, data showed Monday.

According to the Bank for International Settlements (BIS), the won’s nominal effective exchange rate (NEER) stood at 94.83 as of last Tuesday, compared with the previous month’s 91.99.

It marked the highest level since Oct. 9, 2024, when the NEER was 94.91.

The BIS’ NEER measures a currency’s value against those of major trading partners without adjusting for inflation, serving as a gauge of international price competitiveness.

The won’s NEER, which hovered around 100 during the COVID-19 pandemic, fell to 85.9 after the U.S.-Iran war broke out in late February and further to 81.99 in June amid foreign investors’ stock sell-off.

The index has since rebounded as the won has strengthened against the U.S. dollar.

The won-dollar exchange rate averaged 1,358.8 won per dollar in September and 1,337.2 won over the first 23 days of October, marking the won’s strongest monthly performance since September 2024, when the rate averaged 1,332.8 won. In June, the rate averaged 1,528 won per dollar.

In terms of the real effective exchange rate (REER), which adjusts for inflation, the won rose to 92.73 in September, its highest level since November 2024.

Bank of Korea (BOK) Gov. Shin Hyun-song earlier said the won remained undervalued, noting that its NEER was still below 100.

Market watchers expect the Korean won to hover around 1,300 won per dollar.

“Given the country’s economic conditions and potential growth, a won-dollar exchange rate of 1,300 won is consistent with the country’s economic fundamentals,” Park Hyung-joong, an economist at Woori Bank, said.

“Some believe the won has already strengthened beyond its equilibrium level, and it could weaken if external circumstances and market conditions change.”