What is the Currency of South Korea?
According to the International Monetary Fund Economic Ranking 2017, the Republic of Korea, better known as South Korea, is the 12th largest economy regarding GDP. The country has experienced a remarkable growth in its economy and a significant reduction in the rate of unemployment and poverty. Between 1962 and 1994, economic policies set by the government saw the economy rise by 10% annually which was fueled by growth in exports and investment.
The country’s experience in developing infrastructure and better living conditions saw it transform to a dynamic economy. The country depends heavily on international trade and therefore needs a stable currency that fluctuates less and sustains a favorable balance of payment. Its official currency is the Korean Republic Won.
South Korean Won
The won (symbol: ₩; code: KRW) is the official currency of South Korea. It is divided into 100 jeon (cents). Jeon are not used for everyday transactions within Korea but are limited to currency exchange and international trade. The Bank of Korea is responsible for issuing the won; it should be noted that the South Korean Won is different from the North Korean Won used in North Korea. The Bank of Korea reserves all the rights to produce the won. The currency is annually released to commercial banks around the Korean holidays of Seollal and Chuseok.
Evolution of the South Korean Won
Before the split of the Koreas, the currency used was the Korean Yen which was a cognate of the Japanese yen and the Chinese Yuan. After the split in 1945, both countries adopted the won which had equal value to the yen. The South Korean Won was pegged to the dollar at a fixed rate of 15 won = 1 US dollar. After the Korean War, the South Korean won was devalued severally, and in April 1951, the won had lost value to trade at 6000 won = 1 US dollar. In February 1953 the won was replaced with the Hwan at a rate of 100 won = 1 Hwan. In June 1962 the won was reintroduced at a rate of 1 won = 10 Hwan and was pegged at 125 won = $US 1. By January 1980 the peg had devalued to trade at a rate of 580 won = 1 US dollar. In 1980, Korea initiated plans to establish a floating exchange rate and in 1997 after signing an agreement with the International Monetary Fund, it was allowed to float. This was a move that saw the won devalued by half.
South Korean won coins and banknotes
The coins in circulation in South Kora are the ₩1, ₩5, ₩10, ₩50, ₩100, and the ₩500. The ₩1 and ₩5 are rarely used in circulation because the prices of goods have been rounded to the nearest 10 won. The notes in circulation in South Korea are in denominations of ₩1000, ₩5,000, ₩10,000, and ₩50,000. Several modifications have been done on the banknotes including the introduction of sophisticated security features. The government plans to scrap off the use of coins by 2020 as the economy shift from physical to digital currency. As of July 18th 2017, the won exchange rate was 1,123.96KRW = 1 USD.