As volatility looks set to continue in South Korea’s foreign currency market due to concerns over global economic stagnation, North Korea is also facing increasing fears of economic instability.
The exchange rate between the North Korean won and the US dollar recently skyrocketed over a short period in Pyongyang, Sinuiju, Hamhung and other major North Korean cities. The rising currency rates then fell in northern regions of the country, including Hyesan in Ryanggang Province. Meanwhile, the KPW-RMB exchange rate saw no changes, Daily NK sources have reported.
“The dollar price started increasing two weeks ago and last week it was increasing by 100 KPW a day. This caused concerns in the business community,” said a South Pyongan Province-based source.
“The price skyrocketed in the interior of the country where US dollars are used more widely.”
According to the source, the exchange rate between the North Korean won and US dollar rose from 8,400 KPW on August 12 to 8,740 KPW on August 14. During the same period, the rate rose from 8,460 KPW to 8,760 KPW in Sinuiju, while in Hyesan the rate rose from 8,200 KPW to 8,400 KPW.
Daily NK conducted a market survey on August 6 that found the price of US dollars in North Korea was 7,850 KPW in Pyongyang, 7,880 KPW in Sinuiju and 7,900 KPW in Hyesan. The price ballooned some 800 to 900 KPW in just two weeks.
North Korea’s currency rate regularly sees significant volatility, but the last time the rate increased by 900 KPW in just two weeks was in 2015. During the second half of 2015, the North Korean authorities conducted harsh crackdowns on Chinese-made products and heightened international sanctions came into effect. The combination of these two factors caused the exchange rate to skyrocket more than 700 KPW.
There were even areas of the country that temporarily saw a spike to more than 9,000 KPW. In Rason, North Hamgyong Province, the exchange rate rose to 9,740 KPW on August 14 but has since retreated to between 8,500 and 8,700 KPW.
A Daily NK source in North Hamgyong Province said that the rising exchange rate may be related to stagnation in North Korea’s domestic markets. “The currency rate changes every day and it rose in August again,” he said. “The spike in the currency rate this year suggests that businesses aren’t doing so well and it may also be due to external factors.”
The source suggested that the external factors include the US-China trade war and China’s recent intentional devaluation of the yuan. For the first time in 11 years, the Chinese yuan broke past seven renminbi to the dollar on August 5.
The spike in the dollar exchange rate came after August 6, while the lack of change in the KPW-RMB currency rate suggests that North Korea’s recent spike was due to external factors.
“The KPW-RMB exchange rate has seen no change, but the USD-KPW rate continues to rise,” said the source. “There are rumors that fake bills will flood the market if the currency rate continues to rise.”