Korean Won’s Effective Exchange Rate Reaches Two-Year High

The Korean won’s nominal effective exchange rate has risen to its highest level in about two years, marking a sharp recovery from the currency’s weakness earlier in 2026.

Data from the Bank for International Settlements showed the won’s nominal effective exchange rate at 94.83 as of Oct. 20, up from 91.99 in the previous month. The reading was the strongest since Oct. 9, 2024, when the index stood at 94.91.

The nominal effective exchange rate measures a currency against those of a country’s major trading partners. Unlike a bilateral exchange rate, such as the won’s value against the US dollar, it provides a broader view of the currency’s external value. The measure does not adjust for differences in inflation and is often used as an indicator of international price competitiveness.

The latest increase follows a volatile year for the Korean currency. The index, which had remained near 100 during the COVID-19 pandemic, fell to 85.9 after the US-Iran war began in late February. It declined further to 81.99 in June amid foreign investors’ selling of Korean equities.

The won has since rebounded substantially against the dollar. The exchange rate averaged 1,358.8 won per dollar in September and 1,337.2 won during the first 23 days of October. That was the currency’s strongest monthly performance since September 2024, when the rate averaged 1,332.8 won. In June, by comparison, the average stood at 1,528 won per dollar. A lower won-per-dollar rate indicates a stronger Korean currency.

The recovery was also visible in the real effective exchange rate, which adjusts the nominal measure for inflation. The won’s real effective rate rose to 92.73 in September, its highest level since November 2024.

Bank of Korea Governor Shin Hyun-song has said the currency remains undervalued, pointing out that its nominal effective exchange rate is still below 100. Market analysts expect the won to trade around 1,300 per dollar, although views differ over whether the recent appreciation has already moved beyond its equilibrium level.

Woori Bank economist Park Hyung-joong said an exchange rate of about 1,300 won per dollar is consistent with South Korea’s economic conditions and potential growth. He also cautioned that changes in external conditions and financial markets could weaken the currency again. The latest figures therefore show a strong rebound, but not necessarily a permanent shift in the won’s direction.