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Rise in value of Korean won contributes to investment, consumption: report
By YonhapPublished : April 6, 2018 - 13:56
The rise in the real value of the South Korean won compared to other major currencies in recent years has lowered import prices and fueled investments in facilities and private sector consumption, a report said Friday.
According to real effective exchange rate (REER) indices compiled by the Bank for International Settlements (BIS), the exchange rate for the South Korean currency has steadily risen and stood at 123.2 points as of the end of January from 115.34 in April 2015.
REER is the weighted average of a country's currency relative to a basket of other major currencies and is used to measure the effect that foreign exchange fluctuations have on a country's exports.
A reading above 100 means the country's exchange rate is overvalued while numbers falling below the mark shows it is undervalued. BIS compared 61 major currencies to calculate REER.
The latest report said the strengthening of the won has influenced the pace of consumer price hikes.
The Korean won strengthened against the US dollar for the fifth straight quarter in the last three months of 2017 to bring down consumer price rates by 0.05 percentage point per quarter, the National Assembly Budget Office (NABO) said in a report. It noted that the possible strengthening of the Korean won "will likely serve as a factor to increase investment in facilities and consumption in the private sector through falling prices of imported goods."
The volatility of the exchange rate of the Korean won against the greenback also rose over the past three years between January 2015 and February 2018 compared with the period between January 2012 and December 2014, the report said.
"Weakening of the Korean won has a greater impact on decreasing consumption rather than contributing to exports," the report explained. (Yonhap)
