2008 DPRK won exchange rate

(Hat tip to One Free Korea)—According to Open Radio for North Korea, the DPRK won experienced a significant devaluation against to the dollar in the latter half of 2008:


According to the table and the article:

In 2008, North Korea’s exchange rate has shown relative stability of 3200 Won per Dollar and 460 Won per Chinese Yuan.

However, in December 2008, the exchange rate started to skyrocket.  The exchange rate in December was 3630 won per Dollar and 530 Won per Chinese Yuan- which was approximately 13 to 15 percent increase from the month before.  The exchange rate fell slightly to 3540 Won per Dollar and 530 Won per Yuan in January.  Nonetheless, the exchange rate isn’t likely to decrease further.

The sudden rise in foreign currency exchange rate in December seems to have correlation with the Chinese restriction on North Korean imports.  According to Chinese and North Korean traders, the sub par quality of imported products from China (speculated to be food products with melamine) was the origin of the Chinese restriction.  Sporadic breakout of illnesses in various regions of North Korea caused general distrust over Chinese imports, and the North Korean government relayed the complaints to Chinese authorities.  China in turn took a chauvinistic approach and unilaterally regulated trade between China and North Korea to teach North Korea a “lesson”

Nearly 50% of North Korean trade is with China.  Therefore, regulation on trade between North Korea and China, especially on North Korean exports to China inevitably has a severe impact on foreign currency market in North Korea.

For comparison I put together a table of the US$-RMB exchange rate during 2008 (interbank spot rate) using FX history:


So now we can conclude that in 2008 the Yuan appreciated against both the DPRK won and the and the US dollar, and that the US dollar appreciated against the DPRK won. 

So the next question is: how efficient are the currency markets which trade DPRK won? Doing some back of the napkin calculations using data from these two different sources (the story and FX History), I seem to have reached the conclusion that the DPRK won is traded rather efficiently.

The average RMB/USD exchange rate (interbank spot) in December 2008 was 6.86 RMB/USD (from FX history).  If you converted 686 RMB into USD, you would receive $100.  If you converted US$100 into DPRK won at the 3,630 rate in the story quoted above, you would receive w 363,000.  If you exchanged those won for Chinese RMB at the 530 rate quoted in the story, you would receive 684.90 RMB.  684.90 is 99.83% of 686

That seems too good to be true.


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