With the won tipped to continue rising there's more pain in store for South Korean exporters, analysts say.
The South Korean won rose 9 percent against the U.S. dollar over the past 12 months and hit a fresh six-year high at the end of May. A stronger won makes Korean exports less competitive, and it's starting to show.
Exports posted their worst decline in eight months in May, latest trade data showed. Exports fell 0.9 percent on year amid waning Chinese demand, compared with April's 9 percent increase. However, analysts noted that public holidays may have distorted the figure.
"[The stronger won] could leave exporters in a bit of bind," Shane Oliver, head of investment strategy at AMP Capital told CNBC.
"Obviously it has a negative impact if it keeps going up and it also hasn't been helped over the last year because the Japanese yen fell substantially and Korea lost competitiveness against Japan," he added, referring to the yen's 21 percent decline against the greenback in 2013.
South Korea – the world's seventh largest exporter – is home to some of the world's biggest smartphone, ship and industrial equipment makers. Exports accounted for 57 percent of South Korea's gross domestic product in 2012, World Bank data shows.
Bull run to continue
"We're positive on the won, especially against the yen," said Craig Chan, FX analyst at Nomura. "It can definitely strengthen quite significantly."
"If you look at broad valuations... I think it's still somewhat undervalued – not by much, but we're talking about… 3.5 percent on a trade-weighted basis," he added.
Officials also believe the won is undervalued. In April, the International Monetary Fund said the won was undervalued by as much as 8 percent and warned South Korea to limit foreign exchange intervention.