The real value of the Korean won against key foreign currencies dropped 2.2 percent on-month in July, data showed Wednesday, providing exporters with breathing room to boost their overseas sales that had taken a hit from a strong won.

The won's real effective exchange rate reached 112.42 last month, dropping from 114.95 in June and marking the third straight month of decline, according to the data by the Bank for International Settlement's effective exchange rate indices covering 61 economies.

REER, the weighted average of a country's currency relative to a basket of other major currencies, serves as a yardstick of the effect that foreign-exchange fluctuations have on a country's exports.

If the reading is lower than the benchmark 100 from 2010, it indicates that the currency is undervalued. A higher figure translates to a stronger currency.

The on-month fall marked one of the sharpest drops among the polled currencies. Most other currencies that also sharply declined were those of countries that export natural resources, such as Russia, Canada and Australia.

It also marked the third consecutive month the won has gone down after its REER soared to a seven-year high in April.

The decline is largely attributed to a mix of external concerns, such as the U.S. Federal Reserve's expected rate hike, Greek bailout crisis and China's stock market crash.

Foreign investors pulled out of the local market for the second straight month in July. They dumped a net 2.26 trillion won ($1.91 billion) worth of shares last month, the biggest amount since a 5.1 trillion-won outflow in June 2013.

They also withdrew their money from the bond market, with their selling reaching a four-year high of a net 2.61 trillion won, according to the data by the Financial Supervisory Service.

The weakening won, meanwhile, is expected to support local exporters who had been suffering from the relatively strong won, which in turn, had hurt their price competitiveness.

The portion of manufacturers who attributed their business setbacks to the foreign exchange rate decreased to 7.1 percent from 7.8 percent in July, according to a business sentiment survey of local firms by the Bank of Korea.

Market watchers, however, said the country's sizable foreign exchange reserves and continued streak of current account surplus is likely to put a rein on the won's fall. (Yonhap)