The rate of rise in North Korea’s foreign exchange rates has been slowing recently, suggesting that exchange rate volatility has decreased following a rise in the country’s trade volume that began in the second half of last year.
According to Daily NK’s regular survey of market prices in North Korea, the dollar was trading at KPW 8,280 in Pyongyang as of Mar. 5. This was little different from two weeks ago, when the greenback was trading at KPW 8,360 in Pyongyang on Feb. 19.
In Sinuiju and Hyesan as well, the dollar was holding steady in the KPW 8,200s and KPW 8,300s, a slight fall of less than 1% from the Feb. 19 survey.
The yuan was more or less holding steady, too, with the rate changing little compared to Feb. 19.
The yuan was trading at KPW 1,190 in Pyongyang as of Mar. 5, with little movement since Feb. 19, while in Sinuiju, the yuan was trading at 1,200, down KPW 30 from the previous survey.
In Hyesan, the yuan was trading at KPW 1,210, a similar rate compared to last month.
The drop in the volatility of North Korean exchange rates appears to be due, at least in part, to North Korea’s greater trade volume and current international exchange rates.
Lim Song, a researcher with the Bank of Korea’s Economic Research Institute, told Daily NK that it was “likely that the rise in China-North Korea trade last year impacted the decreased volatility of North Korean exchange rates because greater trade volume lessens exchange rate volatility.”
In fact, trade volume between North Korea and China rose significantly last year compared to previous years.
According to China Customs, trade between North Korea and China amounted to USD 1,027,710,000 in 2022, three times 2021’s figure of USD 318,038,000 and twice 2020’s figure of USD 539,059,000.
Of course, trade volume between North Korea and China last year was just one third of what it was prior to the outbreak of COVID-19, but it was still much more than what it was in 2020 and 2021, when North Korea’s border was tightly sealed.
It is possible that this increased trade volume also played a role in decreasing the volatility of North Korea’s exchange rates.
Choi Ji-young, a researcher at the Korea Institute for National Unification (KINU), said there were big differences in North Korea’s exchange rates and international exchange rates while Pyongyang kept the border closed, “but this gap appears to have disappeared since late last year.”
Moreover, the recent international values of the dollar and yuan seem to be reflected in North Korea’s local exchange rates, too.
According to Bloomberg, the dollar was trading at RMB 6.9317 in China as of Mar. 6. In Pyongyang, the dollar was trading at RMB 6.9579 as of Mar. 5, similar to the international dollar-yuan rate.
“Abnormal trends and volatility in the North Korean exchange rates that existed from October 2020 appear to be abating since late last year,” KINU’s Choi told Daily NK.
“This may be a result of [greater] flows of foreign currency as trade volume increases and the narrowing of the gap [between domestic exchange rates] and international exchange rates.”
Translated by David Black. Edited by Robert Lauler.
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