What Is KRW?
The KRW, or Korean Won, is the official currency of South Korea, designated by the ISO 4217 currency code KRW. As a fundamental component of the nation's foreign exchange market, the won serves as the primary medium of exchange for all financial transactions within the Republic of Korea. It falls under the broader financial category of currency and plays a pivotal role in South Korea's economic stability and international trade. The Bank of Korea, the nation's central bank, is responsible for issuing and managing the KRW, implementing monetary policy to maintain its value and ensure financial stability.
History and Origin
The history of the Korean Won is deeply intertwined with the tumultuous political and economic landscape of the 20th century. While various forms of currency, such as the Mun and Yang, existed in Korea for centuries, the modern won currency was first introduced in 1902, replacing the Yang. This initial won, however, was short-lived, as Korea came under Japanese rule from 1910 to 1945, during which time the Korean Yen, linked to the Japanese Yen, became the official currency.9
Following the liberation of Korea in 1945 and the subsequent division into North and South Korea in 1948, the South Korean won was reintroduced. Initially, this won was pegged to the U.S. dollar. However, the economic turmoil and hyperinflation spurred by the Korean War (1950-1953) led to severe devaluations.8 To address this, the won was replaced by the Hwan in 1953. Yet, the Hwan itself succumbed to inflationary pressures, prompting another currency reform. On June 10, 1962, the won was reintroduced, replacing the Hwan at a rate of 10 Hwan to 1 won.7 This reestablished KRW was initially pegged to the U.S. dollar until December 24, 1997, when it transitioned to a floating exchange rate system, a move quickly followed by a significant devaluation during the Asian Financial Crisis of that year.6
Key Takeaways
- The KRW is the official currency of South Korea, managed by the Bank of Korea.
- Its history includes multiple reintroductions and reforms, reflecting periods of significant economic change and inflation.
- The KRW operates under a floating exchange rate system against major global currencies.
- Economic factors such as Gross Domestic Product, trade balance, and capital flows significantly influence its value.
- The currency is crucial for South Korea's robust export-oriented economy and its interactions in global markets.
Interpreting the KRW
The value of the KRW is typically expressed as an exchange rate against other major currencies, such as the U.S. dollar (USD/KRW) or the Euro (EUR/KRW). A higher number in a USD/KRW quote means that more won are needed to purchase one U.S. dollar, indicating a weaker won. Conversely, a lower number signifies a stronger won. For instance, if the exchange rate is 1,350 KRW per USD, it means ₩1,350 is equivalent to $1.00 USD. Daily exchange rates for the South Korean Won, alongside other global currencies, are regularly published by financial institutions and central banks, such as the Federal Reserve Board's H.10 release.
5Interpretation of the KRW's movements involves analyzing a multitude of macroeconomic factors. A strengthening won can make imports cheaper and exports more expensive, potentially affecting a nation's trade balance. A weakening won can have the opposite effect. Traders and economists closely monitor these rates as indicators of South Korea's economic health and its competitiveness in global markets.
Hypothetical Example
Consider an investor based in the United States looking to purchase shares of a South Korean technology company listed on the Korea Exchange. The investor has $10,000 USD to invest. If the current USD/KRW exchange rate is 1,350, the investor would convert their $10,000 USD into:
This ₩13,500,000 KRW would then be used to purchase the shares. Should the investor decide to sell their shares later and the company's stock price remains unchanged, but the exchange rate shifts to 1,300 KRW per USD, the ₩13,500,000 KRW would then convert back to:
In this scenario, even without a change in the stock price, the investor gains $384.62 USD due to the strengthening of the KRW against the USD, illustrating the impact of currency risk on international investments. This example highlights why careful consideration of investment strategies must include currency fluctuations.
Practical Applications
The KRW is integral to various aspects of finance and economics, reflecting South Korea's status as a major global economy. Its applications include:
- International Trade: South Korea is heavily reliant on exports, and the KRW's value directly impacts the competitiveness of its goods and services in global markets. Businesses involved in import and export operations continually monitor the KRW exchange rate to manage costs and revenues.
- Foreign Investment: International investors consider the stability and outlook of the KRW when allocating capital to South Korean assets, including stocks, bonds, and real estate. A stable or appreciating KRW can enhance returns for foreign investors.
- Tourism: For tourists visiting South Korea, the KRW exchange rate determines the purchasing power of their home currency within the country.
- Economic Analysis: Economists and policymakers analyze the KRW's performance as a key indicator of South Korea's economic health, capital flows, and international competitiveness. Institutions like the International Monetary Fund (IMF) regularly publish assessments of South Korea's economic growth prospects, which often include insights into currency stability and its impact. For example, in April 2025, the IMF revised down its growth outlook for South Korea, citing increasing uncertainties, a factor that can influence the KRW's valuation.
- Por3, 4tfolio Management: Investors seeking portfolio diversification often include South Korean assets, making an understanding of the KRW essential for managing currency exposure and overall portfolio risk.
Limitations and Criticisms
While generally considered a stable and widely traded currency, the KRW is subject to certain limitations and criticisms. Its high nominal value against major currencies, such as the U.S. dollar (often exceeding 1,300 KRW per USD), can sometimes lead to perceptions of it being a "weak" currency, though this is merely a matter of denomination and not indicative of its true purchasing power or economic strength.
A more significant limitation stems from its susceptibility to external shocks and global economic volatility. Given South Korea's export-driven economy, the KRW can experience considerable fluctuations in response to shifts in global trade, commodity prices, or geopolitical events. For instance, during periods of heightened market anxiety or global financial crises, the KRW has historically experienced sharp devaluations, as seen during the 1997 Asian Financial Crisis and more recent periods of political turmoil and trade tensions. This [vol2atility]() can pose challenges for businesses engaged in international trade and for investors managing foreign currency exposure. Furthermore, while the Bank of Korea aims to maintain price stability and foster sustainable economic growth through its management of the KRW, its effectiveness can be tested by significant external pressures.
KRW vs. Hwan
The terms KRW (Korean Won) and Hwan refer to two distinct currencies that have served as South Korea's legal tender at different points in its modern history, reflecting periods of economic transition. The KRW is the current official currency of South Korea, adopted in 1962. Prior to this, the Hwan was the currency in circulation from 1953 to 1962. The Hwan was introduced to replace the initial post-liberation won at a rate of 1 Hwan to 100 won, primarily as an attempt to combat severe inflation that plagued the South Korean economy after the Korean War. However, the Hwan itself eventually succumbed to inflationary pressures. In 1962, the government once again reformed its currency system, reintroducing the won, this time at a rate of 1 won to 10 Hwan. Therefore, while both were official currencies, the Hwan represents an interim currency period between two iterations of the won.
FAQs
Q: What is the symbol for the South Korean Won?
A: The symbol for the South Korean Won is "₩". It precedes the numerical value, for example, ₩1,000.
Q: Is the KRW a strong or weak currency?
A: The strength or weakness of the KRW is relative to other currencies and depends on the prevailing exchange rate. While its nominal value against the U.S. dollar may seem high (e.g., 1,300 KRW to 1 USD), this is a function of its denomination history and does not inherently imply weakness. Its actual strength is determined by its purchasing power and its stability in the foreign exchange market.
Q: Who issues the KRW?
A: The KRW is issued and managed by the Bank of Korea, which serves as the central bank of the Republic of Korea. It is responsible for the country's monetary policy and currency issuance.
Q: How does the KRW's value affect South Korean exports?
A: A weaker KRW makes South Korean exports cheaper and more competitive in international markets, potentially boosting export volumes. Conversely, a stronger KRW makes exports more expensive, which can reduce their competitiveness. This relationship is a key consideration in international trade dynamics.
Q: What is the lowest denomination of KRW used today?
A: While the KRW is theoretically divided into 100 jeon, the jeon subunit is no longer used for everyday transactions. For practical purposes, the lowest circulating coin denominations are ₩10, ₩50, ₩100, and ₩500.1