What Is the Korean Won (KRW)?

The Korean won (KRW) is the national currency of South Korea. Its users denote the won by using the symbol "₩," as in "₩1,000." Since 1950, it has been administered by the nation's current central bank, the Bank of Korea.

The won is fully convertible and is routinely traded against other global currencies, such as the U.S. dollar (USD), the Japanese yen (JPY), and the euro (EUR). One won is divided into 100 subunits, called "jeon."

Key Takeaways

  • The Korean won is the national currency of South Korea.
  • The won was replaced and modified at several points over the past century, in order to cope with devaluations and the effects of war.
  • Today, the won is a stable and widely-traded currency, supported by a large and very advanced South Korean economy.

Understanding the Korean Won (KRW)

The Korean won has been used in some form for thousands of years. During the occupation of Korea by Japan, which spanned from 1910 to 1945, the won was briefly replaced with a Japanese colonial currency called the Korean yen.

After World War II, however, the division of North Korea and South Korea resulted in two separate currencies, each called the Korean won. Initially pegged to the USD at a rate of 15 won to 1 dollar, the first South Korean won was subdivided into 100 jeon. A number of devaluations occurred thereafter, due largely to the effects of the Korean War.

In 1950, the Bank of Korea began operations as South Korea's new central bank. It assumed the duties of the previous monetary authority, the Bank of Joseon, with exclusive authority to issue banknotes and coins for the country. Today, the Bank of Korea issues banknotes in denominations ranging from 1,000 to 50,000 won. The notes feature early Yi, or Chosŏn, dynasty figures, including writers Yi Hwang, featured on the 1,000-won note; Yi I, featured on the 5,000-won note; and King Sejong, who appears on the 10,000-won note.

In the 1980s, South Korea sought to expand the relevance of its currency to international trade by replacing its dollar peg with a basket of currencies. Further changes were made in the late 1990s, when the government responded to the Asian Financial Crisis by allowing the won to float freely on foreign exchange markets.

Today, South Korea's economy is one of the largest in Asia and a major force in international commerce. Like many advanced economies, it has a large service sector, comprising about 60% of annual gross domestic product (GDP). South Korea is also known for its advanced manufacturing sector, which produces high-value products like semiconductors and automobiles. Accordingly, industry is a significant component of South Korean GDP, contributing about 40% of the total.

Real World Example of the Korean Won (KRW)

The value of the won has been quite stable over the past decade. In 2010, 1 USD was equal to 1,157 won. As of Oct. 2019, the equivalent figure is almost the same: 1,164 won per USD.

Inflation in South Korea has declined over this same timeframe, from 4.7% in 2008 down to 1.5% in 2018. Meanwhile, the country's economy has grown at a compound annual growth rate (CAGR) of about 4% per year. Specifically, per-capita GDP, measured based on purchasing power parity (PPP), has grown from 26,406 in 2007 to 41,351 in 2018.