"Korean money was so cheap at first that I couldn't believe it."
On the 11th, Tyler Ward (15), whom we met in front of a currency exchange near Gangnam Station in Seoul, said this. An American, he said he came traveling with a friend. Ward exchanged a little over $130 for 200,000 won and smiled, saying, "It feels like I made money because the exchange rate is good."
At another nearby exchange, a Korean customer was converting won to dollars. The person said, "I was flustered because the dollars I got in hand were far fewer than I expected," and noted, "I only accepted it after the staff tapped it out on a calculator and showed me."
As the won-dollar exchange rate against the U.S. dollar surged to a 7-month record high, customers buying or selling dollars in exchange-dense areas such as Gangnam, Myeong-dong, and Namdaemun in Seoul had mixed fortunes.
In the Seoul foreign exchange market, the won-dollar exchange rate closed at 1,465.7 won at 3:30 p.m. on the 12th. That was up 2.4 won from the previous day. During trading, it even broke above the 1,470-won level for the first time in seven months. That means the value of the won fell by that much.
Exchange operators said foreign tourists mostly use credit cards, so demand for exchanging currency is not as strong as before. However, they said the recent spike in the exchange rate has actually brought in more Korean customers.
Park, a person surnamed Park (30) who runs an exchange in Myeong-dong, Seoul, said, "Recently, customer visits have increased and dollar transactions have risen," adding, "Most are people coming to sell dollars aiming for dollar exchange gains."
Choi, a person surnamed Choi (37) who works at an exchange at Gangnam Station in Seoul, also said, "Koreans overseas (overseas compatriots) come to exchange dollars into won, and while they are pleased to get more, they often worry and ask whether Korea's economic situation is a bit bad."
Even as the won-dollar exchange rate keeps marching higher, there were Koreans buying dollars at exchanges. Kim, a person surnamed Kim (36), an IT worker we met at an exchange near Sinnonhyeon Station, said he has been steadily buying dollars. He said, "Whenever money comes in, I buy dollars worth tens of thousands of won," and added, "It looks like the (won-dollar exchange rate) will rise further."
Several factors are cited for the recent, persistent rise in the won-dollar exchange rate. With Korea's base rate below the U.S. benchmark rate, there is a resurfacing concern that the U.S. Federal Reserve (Fed) may not proceed with additional rate cuts this year.
In addition, a $350 billion (about 500 trillion won) investment fund for the United States is adding to market uncertainty. Although an annual cap of $20 billion was set, the method of financing remains opaque.
Above all, there is a growing chorus that Korea's economic fundamentals have weakened. Korea's economic growth rate is lower than that of the United States. According to International Monetary Fund (IMF) projections, Korea's growth rate is 0.9% this year and 1.8% next year. The United States is at 2% this year and 2.1% in 2026. For two consecutive years, Korea is expected to have a lower growth rate than the United States.
Even so, the money supply growth rate is higher in Korea than in the United States. The broad money (M2) growth rate, which combines cash and short-term financial products that can be easily cashed, has increased by an average of 4% year over year in the United States so far this year, while Korea has reached 6.9%.
From the perspective of exchange operators, the number of buyers has fallen relative to sellers, so it is not much help to business. Some even said they are worried because it is difficult to gauge the direction of the exchange rate.
Kim, a person surnamed Kim (58) who runs an exchange in Myeong-dong, said, "I thought the won-dollar exchange rate would fall after the Asia-Pacific Economic Cooperation (APEC) summit ended, but it is rising again," adding, "I've been in this line of work for quite a while, but these days I really can't read the exchange rate."