North Korea’s KPW-USD exchange rate continues to climb amid the strengthening of the US dollar while the international economic slowdown causes a surge in demand for stable assets. The international currency market appears to be impacting the KPW-USD exchange rate, but the country’s dollar exchange rate is climbing much more sharply than the international rate.
According to a recent Daily NK survey of exchange rates in North Korea, the KPW-USD exchange rate crossed over the KPW 8,000 line in Pyongyang, Sinuiju and Hyesan as of July 26.
In particular, the dollar rate in Pyongyang was KPW 8,150, 15% higher than it was during Daily NK’s July 10 survey, when it was KPW 7,100.
The US Dollar Index (DXY), which shows the value of the dollar against six nations’ currencies, was 107.19 on July 26, up 3.4% compared to June 26. Given that Pyongyang’s KPW-USD exchange rate rose more than 10% between June 26 and July 26, the rate at which North Korea’s dollar exchange rate is rising is far higher than the international rate.
On the other hand, the KRW-RMB exchange rate in North Korea has been holding fairly stable from July 10 to July 26. One yuan equaled KPW 950 as of July 26, just KPW 20 more than what it was on July 10.
The dollar has been rising more sharply than the yuan in North Korea likely because of continued signs that state-led trade – centered around large trading companies operated by the Central Committee, Ministry of State Security, Ministry of Social Security, Ministry of Defense and other powerful agencies – looks set to expand.
Daily NK recently reported that on July 4, the Ministry of External Economic Relations issued orders to regional trade bureaus and trading companies to make preparations for the restart of trade. The order reportedly expands shipboard trade through the port of Nampo and participating companies must include a list of items designated by the state in their imports.
However, the order appears to be limited to just large trading companies operating on orders from the government.
Daily NK’s source said that, after the order, seven or eight ships operated by large trading companies under the Central Committee and Ministry of Defense set sail from the port of Nampo. The source speculated that because the ships were laden with a considerable amount of minerals, a large amount of imports will soon enter the country through the North Korean port.
Most of the large-scale, state-led trade through the part of Nampo is conducted in dollars. In the past, there was heavy use of the yuan when small- and medium-sized trading companies were conducting trade with China from Yanggang Province or North Pyongan Province. Recently, however, most transactions are in US currency.
Moreover, Daily NK understands that the Chinese more often prefer dollars over the yuan in trade with North Korea.
Because of this, the number of trading companies buying up dollars has noticeably increased throughout North Korea, and this trend appears to have translated into a spike in the dollar exchange rate.
In particular, the dollar rate climbed sharply not just in Pyongyang, but also in other major cities such as Sinuiju and Hyesan. The source told Daily NK that this reflects the extent of North Korea’s dollar shortage.
“It’s not possible to obtain the amount [of dollars] required [for trading activities] by solely gathering the dollars that exist in Pyongyang,” said the source. “There are no dollars left in the country given the fact that trading companies [can only] conduct trade once they’ve collected the dollars sold by money changers throughout the country.”