November 10, 2010
BIS says won is greatly undervalued
The Korean won is the second-most undervalued currency among those of the G-20 economies.
The real effective exchange rate index for the Korean unit came in at 81.67 in September, according to data compiled by the Bank for International Settlements (BIS).
Real effective exchange rates represent the weighted average of a country’s currency relative to a basket of other currencies adjusted by relative consumer prices. A reading below the benchmark of 100 means that a currency has room for appreciation.
The Korean won was the second-most undervalued currency, trailing the British pound at 81.23, data showed. Meanwhile, Brazil’s real - coming in at 148.16 - was calculated to be the most overvalued unit among currencies of G-20 members.
The data comes as major countries engage in competitive devaluations to boost exports.
Finance chiefs from the G-20 countries recently agreed to refrain from this kind of competitive currency devaluation and allow for a market-determined exchange rate system.
A fresh round of quantitative easing by the U.S. Federal Reserve is causing more liquidity to flow to emerging countries, pushing up currencies and stocks.
China argued that the Fed’s move would cause the global economy to become awash with hot money. The currency issue is expected to dominate discussions at the G-20 Summit slated for Thursday and Friday.
Korea is studying ways to curb excessive cross-border capital flows, which could increase currency volatility and destabilize the local financial system. The government is likely to announce potential moves after the G-20 Summit.
The Korean won has climbed almost 4.6 percent to the greenback this year on the back of a faster-than-expected economic recovery.
BIS says won is greatly undervalued
The Korean won is the second-most undervalued currency among those of the G-20 economies.
The real effective exchange rate index for the Korean unit came in at 81.67 in September, according to data compiled by the Bank for International Settlements (BIS).
Real effective exchange rates represent the weighted average of a country’s currency relative to a basket of other currencies adjusted by relative consumer prices. A reading below the benchmark of 100 means that a currency has room for appreciation.
The Korean won was the second-most undervalued currency, trailing the British pound at 81.23, data showed. Meanwhile, Brazil’s real - coming in at 148.16 - was calculated to be the most overvalued unit among currencies of G-20 members.
The data comes as major countries engage in competitive devaluations to boost exports.
Finance chiefs from the G-20 countries recently agreed to refrain from this kind of competitive currency devaluation and allow for a market-determined exchange rate system.
A fresh round of quantitative easing by the U.S. Federal Reserve is causing more liquidity to flow to emerging countries, pushing up currencies and stocks.
China argued that the Fed’s move would cause the global economy to become awash with hot money. The currency issue is expected to dominate discussions at the G-20 Summit slated for Thursday and Friday.
Korea is studying ways to curb excessive cross-border capital flows, which could increase currency volatility and destabilize the local financial system. The government is likely to announce potential moves after the G-20 Summit.
The Korean won has climbed almost 4.6 percent to the greenback this year on the back of a faster-than-expected economic recovery.
