Over the past year, the North Korean won has experienced a notable decrease in value against the dollar and yuan. This shift has led to a significant transformation in marketplace dynamics, with a growing trend of more transactions being conducted in foreign currencies. Sources within North Korea have shed light on how these exchange rate changes have influenced public behavior and market preferences.

Unraveling the North Korean Won's Exchange Rate Journey and Its Effects

The Decrease in North Korean Won's Value

1: The North Korean won has witnessed a consistent decline in value against major currencies such as the dollar and yuan. This trend has had far-reaching consequences for the North Korean economy. As the value of the won drops, it becomes less attractive for both domestic and international transactions. Merchants and consumers alike are now forced to reassess their currency preferences and adapt to the new economic reality. 2: The decrease in the won's value is not just a statistical phenomenon; it has a tangible impact on people's daily lives. For instance, when purchasing imported goods or engaging in cross-border trade, the higher cost of the won makes foreign currencies more appealing. This has led to a shift in consumer behavior, with more people opting for transactions in dollars or yuan to avoid the losses associated with the depreciating won.

The Rise of Foreign Currency Transactions

1: Sources within North Korea have indicated a significant increase in public demand for foreign currency. Market vendors, in particular, have shown a preference for conducting transactions in either the dollar or yuan. This preference is driven by the diminishing value of the local currency and the need to protect their profits. For example, when the exchange rate between one yuan and the won fluctuates, vendors may adjust their prices accordingly to ensure they do not suffer losses. 2: The rise of foreign currency transactions is not limited to specific regions or industries. It has permeated various aspects of the North Korean economy, including domestic agricultural products. In the past, most agricultural products were bought and sold using the North Korean won. However, with the changing economic landscape, even in rural areas not typically influenced by smuggling, merchants are now preferring transactions in foreign currency. This shift challenges the authorities' efforts to regulate and control the economy.

The Reversal of De-dollarization

1: During the pandemic, North Korea witnessed a de-dollarization trend as trade restrictions were imposed. This led to a decline in foreign currency demand and exchange rates. However, the current rise in exchange rates has reversed this trend, driving a renewed preference for the dollar and yuan. Especially in regions close to the Chinese border, where smuggling previously played a significant role in facilitating the flow of Chinese-made goods, the preference for foreign currency has intensified. 2: The re-dollarization trend is a complex phenomenon that reflects the interplay between various economic factors. It not only affects trade and commerce but also has implications for the North Korean government's ability to manage the economy. As the reliance on foreign currency grows, the authorities face challenges in maintaining control over the domestic currency and implementing fiscal policies.

The Role of Money Changers

1: With the increasing reliance on foreign currency, North Koreans are turning to money changers for currency conversion. This has become a common practice as people seek to facilitate their purchases and navigate the changing economic environment. Money changers play a crucial role in providing the necessary services to meet the demand for foreign currency. 2: The growing usage of the dollar and the corresponding weakening of state control over the economy pose significant challenges for North Korea. Analysts like Son Gwang-su from the KB Financial Group Research Institute have pointed out that attempts to force North Koreans to use the North Korean won are likely to be ineffective in the face of the depreciation of the won. This highlights the need for the North Korean government to address these issues and find ways to manage the economy in a changing global context.