The Korean won's real effective exchange rate fell to 82.99 in June, the lowest level since March 2009 during the global financial crisis, according to data released July 26 by the Bank for International Settlements (BIS). The Japanese yen's real effective exchange rate dropped to 65.3 in June, marking a new historical low and ranking last among 64 tracked currencies, while the won ranked second-lowest. The won's June depreciation resulted from the won/dollar exchange rate surging to an intraday high of 1,555.2 won in June, though July has seen a sharp reversal with the won appreciating 6.24% against the dollar through July 24—the strongest performance among major currencies—driven by large-scale dollar selling from export companies including SK Hynix's conversion of approximately $26.5 billion from its ADR listing and the Bank of Korea's July 16 rate hike to 2.75%.
Korean Won Records Lowest Real Value Since 2009 Financial Crisis
The won's June real effective exchange rate of 82.99 represents a 1.75-point decline from the previous month, according to BIS data released July 26. This marks the largest monthly drop since November of the previous year, when the rate fell 1.92 points to 87.23 amid surging retail investor overseas stock purchases. The real effective exchange rate measures a currency's purchasing power in international trade, with the decline indicating the won's real value fell relative to other currencies. The June average won/dollar exchange rate reached 1,527.95 won (based on the 3:30 p.m. benchmark rate), the highest level since February 1998 (1,626.7 won) during the Asian financial crisis. Among the 64 currencies tracked in BIS statistics, the won ranked 63rd and the yen ranked 64th in June real effective exchange rates. The yen has recorded consecutive monthly historical lows since BIS statistics began in 1994, declining for 12 consecutive months from May of the previous year through April 2026, rebounding 0.49 points in May before falling 0.73 points in June to set another record low.
Won Appreciates 6.24% in July as Export Companies Sell Dollar Holdings
The won/dollar exchange rate closed at 1,458.5 won on July 25 at 6 a.m., down 15.7 won, marking the first time the overnight trading close fell into the 1,450-won range since May 7 (1,456.0 won). Through July 24, the won appreciated 6.24% against the dollar, the largest gain among major 20-country currencies, while the yen depreciated 0.83%, with the yen/dollar rate reaching 163.986 yen on July 23. The won/yen cross rate fell to 889.83 won per 100 yen on July 24, the lowest level since July 2024. SK Hynix has been sequentially converting approximately $26.5 billion raised from its Nasdaq ADR listing in early July and bringing the funds into Korea. Export companies that had been reluctant to sell dollar holdings amid rising exchange rate expectations have actively engaged in currency hedging and selling, pulling down the exchange rate. Lee Min-hyuk, KB Kookmin Bank economist, stated: "Currently, the biggest factor in exchange rate fluctuations is supply-demand factors such as ADR conversion. With the foreign exchange authorities' strong commitment to exchange rate stability confirmed, the exchange rate is likely to continue a gradual downward trend for the time being."
Bank of Korea Rate Hike Contrasts with Japan's Delayed Tightening
The Bank of Korea's Monetary Policy Committee raised the base rate from 2.5% to 2.75% on July 16, implementing monetary tightening for the first time in three and a half years. Bank of Korea Governor Shin Hyun-song stated at a subsequent press conference: "We will respond until we are confident that the inflation rate will stably converge to the target level," repeatedly emphasizing the monetary tightening stance. Market observers widely expect the Bank of Korea to raise the base rate an additional one to two times within the year. In contrast, the Bank of Japan raised its base rate to approximately 1% in the previous month—the highest level in 31 years—but this remains lower than the United States (3.50-3.75%) and other advanced economies, with the pace of rate increases slower than anticipated. Lee Yu-jeong, Hana Bank researcher, stated: "Concerns about fiscal soundness deterioration due to the Takaichi government's expansionary fiscal stance and expectations of delayed additional tightening by the Bank of Japan are intensifying yen depreciation pressure. In contrast, Korea's domestic supply-demand conditions have significantly improved, and the Bank of Korea's hawkish stance is supporting won strength."
Economists Forecast Continued Won Strength Amid Dollar Supply Surplus
Seo Jeong-hoon, Hana Bank chief researcher, stated: "With Korea's annual growth rate forecast to be significantly revised upward, the Bank of Korea's monetary tightening stance will act as a downward factor for the exchange rate. Early dollar selling by exporters concerned about a sharp short-term decline will also pull down the exchange rate, and we should leave open the possibility of touching the 1,450-won level in the short term." However, some analysts note that exchange rate decline may be limited as international oil prices resume an upward trend amid renewed Middle East tensions and the yen—considered an alternative currency in global asset markets—continues to weaken. Lee Min-hyuk, economist, stated: "Since the won also functions as an alternative currency to the yen, if yen weakness continues, the won may also face some depreciation pressure. The Middle East war situation, international oil price trends, and global dollar strength due to rising U.S. Treasury yields are also risk factors. If high oil prices and high interest rates are prolonged, there is a possibility that the won could turn to weakness."
FAQ
What caused the Korean won's real effective exchange rate to fall to its lowest level since 2009 in June?
The won's June real effective exchange rate dropped to 82.99 due to the won/dollar exchange rate surging to an intraday high of 1,555.2 won during the month, with the June average rate reaching 1,527.95 won—the highest since the 1998 Asian financial crisis. The 1.75-point monthly decline was the largest since November of the previous year.
Why did the Korean won and Japanese yen move in opposite directions in July after declining together through June?
The won appreciated 6.24% against the dollar through July 24 while the yen depreciated 0.83%, primarily due to large-scale dollar selling by Korean export companies including SK Hynix's conversion of approximately $26.5 billion from its ADR listing, combined with the Bank of Korea raising its base rate to 2.75% on July 16 while the Bank of Japan maintained a slower tightening pace.
How low did the won/yen exchange rate fall in July?
The won/yen cross rate fell to 889.83 won per 100 yen on July 24, dropping below 890 won for the first time in two years since July 2024, as won strength and yen weakness combined.
