[THE INVESTOR] The South Korean won was the best performer among major global currencies in July this year, data showed Aug. 22, adding to concerns about the negative impact of a strong local currency on exports.

“The price competitiveness of exporting firms may be further undermined due to the won’s strength,” said Lee Chang-sun, a senior researcher at LG Economic Research Institute.

According to the Bank for International Settlements, the real effective exchange rate, or REER, of the Korean currency rose 2.64 percent on-month to 116.93 points against the US dollar in July to show the fastest gain among the currencies of 27 leading economies.

REER measures the value of a currency against a basket of other currencies, taking into account inflation and trade. A reading above 100 means the currency is highly evaluated compared to 2010, while a figure below 100 implies a low evaluation.

Australian and Japanese currencies were the second and third best performers, showing 2.6 percent and 1.68 percent advances, respectively.

The won’s strong appreciation is mainly attributable to the possibility of a delay in the US Fed’s rate hikes, analysts said.

Leading credit rating agency Standard & Poor’s also raised South Korea’s sovereign rating by one notch earlier this month, helping expand the inflow of foreign capital into the economy.

But the strong currency is also stoking concerns about its negative impact on Korea’s shrinking exports.

Exports fell 10.2 percent last month from a year earlier, marking the 19th consecutive month of decline.

(theinvestor@heraldcorp.com)