Korean Won (KRW) Definition and Currency History

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 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."

As of February 2021, 1 U.S. dollar is equal to approximately 1,098 KRW.

Understanding the Korean Won

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, a number of devaluations occurred thereafter due largely to the effects of the Korean War on the nation's economy.

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.

The Won and Korea's Economy Today

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 56% 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 33% of the total.

The value of the won has been quite stable over the past decade. In February 2011, 1 USD was equal to 1,117 won. As of February 2021, the equivalent figure is almost the same: 1,098 won per USD.

Inflation in South Korea has declined over this same timeframe, from 4% in 2008 down to .5% in 2020. 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 (in constant international $) $29,644 in 2009 to $43,143 in 2019.