Assignment on South Korean Won

Running head: SOUTH KOREAN WON
South Korean Won
Name of the Student:
Name of the University:
Author Note:

SOUTH KOREAN WON1
Table of Contents
Introduction:...............................................................................................................................2
History of the South Korean Won:.........................................................................................2
Balance of Payments account of the South Korean Economy:..............................................3
Currency Movements:............................................................................................................5
Policy to attract Investment and FDI:....................................................................................6
Impact on Currency:...............................................................................................................7
Risks:......................................................................................................................................9
Recommendation to trading countries:..................................................................................9
Conclusion:..............................................................................................................................10
References:...............................................................................................................................11

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Introduction:
In the following report the currency of South Korea is analysed and the major
determinants which can impact the currency rate are discussed. The history of the currency is
discussed along with the current situation of the balance of payment accounts are analysed
and its impact on the Korean currency.
The internal factors which affect the currency are highlighted and the risk which is
present in the economy is analysed. The favourable factors which is present in the South
Korean Economy is discussed highlighting the points which are favourable for investment in
the country. Also advice is provided to the investors in the economy along with a conclusion
is presented at the end of the report.
History of the South Korean Won:
The Korean Won was the currency of the Korean Regime for thousands of years,
when it changed in the year 1910. The era of colonization by japan which started in 1910 and
continued till 1945. At this point the Korean Won was replaced with Japanese yen when it
was valued at par. Thus this currency was used till the year 1945, when after World War II
Korea was divided into North and South and Won replaced the Yen in both the countries.
The South Korean Won initially had a fixed exchange rate which was 15 won for 1
US dollar which was increased till the year 1951, when 1 USD was equal to 6000 won. The
Korean won was replaced with Hwan in 1953, where 1 Hwan was equal to 100 won. Again
after the Korean War the won was introduced in the country where 1 won was equal to 10
Hwan, and by 1975 all the Hwan circulating were removed from the economy. The won was
pegged with the USD at 125 won was equal to 1 USD which was followed till 1980 and the
peg increasing to 580 won equal to 1 USD. Thus post 1980, the currency was tried for a

SOUTH KOREAN WON3
floating peg which was successful in the year 1997 after the Asian crisis, which led to the
devaluation of the currency to almost half.
The Bank of Korea which is the national bank of South Korea issues the Won
currency. In the year 2006, the currency had a lot of counterfeits which led to the issue of
new series with additional security features by the Bank of Korea. Thus currently the
economy has 1000, 5000, 10000 and 50000 Won currency notes in circulation. Also due to
the increase in digital payments the use of coins has been reduced in the economy and in
future the use of coins will be abolished (www1.oanda.com).
Balance of Payments account of the South Korean Economy:
The South Korean economy is one of the top exporters in the world ranking to around
5th in terms of global exports. The country exported around $596 billion and imported around
$471 billion in the year 2017. The major exports which had been conducted has been in
circuits and cars, while it has imported $56 billion worth of crude oil. The major exporting
countries are the United States and China which comprise of almost 60% of the total exports
made by the South Korean economy. The exports of the economy have increased by almost
1.2% at an annual rate over the years (www.fxcm.com).
The South Korean economy has a positive trade balance in its current accounts, which
is due to the export being greater than the import. Thus the Korean Currency had been
depreciating with respect to the US dollar being the positive trade balance being one of the
factors.
Since the exports dominate the Korean economy, the importers in other countries
need to purchase the Won currency to make payments to the exporters. Thus the demand for
the currency increases leading to the increase in the value of the currency in the international
markets.