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Recently, polarimetric synthetic aperture radar (SAR) interferometry has generated much interest for forest applications. Forest heights and ground topography can be extracted based on interferometric coherence using a random volume over ground coherent mixture model. The coherence estimation is of paramount importance for the accuracy of forest height estimation. The coherence (or correlation coefficient) is a statistical average of neighboring pixels of similar scattering characteristics. The commonly used algorithm is the boxcar filter, which has the deficiency of indiscriminate averaging of neighboring pixels. The result is that coherence values are lower than they should be. In this paper, we propose a new algorithm to improve the accuracy in the coherence estimation based on speckle filtering of the 6×6 polarimetric interferometry matrix. Simulated images are used to verify the effectiveness of this adaptive algorithm. German Aerospace Center (DLR) L-Band E-SAR data are applied to demonstrate the improved accuracy in coherence and in forest height estimation.