Korean won's real effective exchange rate sinks to lowest level in 16 years

According to the data by the Bank for International Settlements (BIS) released by the Bank of Korea, the local currency's REER reached 89.09 at the end of October, down 1.44 points from a month earlier.

It marked the weakest level in 16 years and two months, since August 2009, when the REER stood at 88.88.

It is also lower than the 89.29 posted at the end of March, when domestic political uncertainty peaked following the brief imposition of martial law by former President Yoon Suk Yeol.

REER measures the strength of a currency relative to a basket of other currencies, adjusted for inflation. It often serves as a measure of a country's international price competitiveness, with a REER below 100 indicating the currency is undervalued.

Among the BIS-listed 64 countries, South Korea's REER as of the end of October was the third lowest, trailing behind Japan's 70.41 and China's 87.94.

The monthly decline of 1.44 points was also the second fastest globally, following New Zealand's 1.54-point drop.

This marked South Korea's largest monthly REER loss in seven months, since a 1.66-point plunge in March of this year.

"Risk-averse sentiment has strengthened the U.S. dollar, and increased dollar buying driven by Koreans investing in U.S. stocks has amplified the won's weakness," said Park Ji-hoon, an analyst at Hana Bank. "South Korea's relatively stable inflation has also contributed to the decline in the REER."

Earlier, Qazinform News Agency reported that Seoul shares had tumbled amid AI bubble fears.