What is the Korean Won (KRW)
The Korean won (KRW) is the official currency of South Korea. One won is divided into 100 jeon, the monetary subunit, though the jeon is not used for transactions; it appears only in foreign exchange rates. The currency is fully convertible and it is frequently traded with several major global currencies, including USD, AUD, CAD, EUR and JPY.
BREAKING DOWN Korean Won (KRW)
The Korean won has been used in some form for thousands of years. More recently, Korea’s division after World War II resulted in two different currencies for South and North Korea, each named won. Initially pegged to the U.S. dollar 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, in part due to the onset and what was the aftermath of the Korean War.
South Korea kept the dollar peg until the 1980s before replacing it with a basket of currencies to help it expand its global trade potential. In the late 1990s, the government let the won to float freely in response to the Asian currency crisis.
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. 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 onthe 10,000-won note. The values of coins range from 1 to 500 won.
The Korea Minting and Security Printing Corporation is responsible for printing the currency.
Korean Won and Monetary Policy
The Bank of Korea’s Monetary Policy Board sets the country’s monetary policy track, namely the base interest rate. Inflation targeting is the central bank’s monetary policy framework; one of its main goals is to prime the interest rate to keep the country’s consumer price index at a predetermined target over a three-year period. From 2016 to 2018, the bank set an inflation target of 2 percent, lowering the target from 2.5 percent to 3.5 percent previously.
The board looks to meet its objective of obtaining price stability over a mid-term horizon by taking into account a range of factors, including domestic price movements, the economy, financial and foreign exchange market conditions and changes in the flow of the world economy.