North Korea Revalues its Currency (Update)

According to China's Xinhua News Agency, the North Korea foreign ministry apparently orally confirmed to the foreign embassies stationed in Pyongyang today that it did, indeed, revalue its currency, with the exchange rate between the old and new notes being 100:1.

Here are some of the updated information from South Korea's Yonhap News Agency on the revaluation:

• According to the North's fixed exchange rate before the adjustment, a U.S. dollar was equal to 135 North Korean won.

• "Many citizens in Pyongyang were taken aback and in confusion. Those who were worried about their hidden assets rushed to the black market to exchange them with yuan or U.S. dollars. The yuan and the dollar jumped," one of the sources said.

• The revaluation was the first for North Korea since 1992 and the fifth since its government was founded in 1947. In the first reform in 1947 and the third in 1979 and fourth in 1992, currencies were exchanged 1 to 1 with no adjustment of denomination values. Only the second reform in 1959 raised the exchange rate to 100 to 1 as in the reported latest move.

• The latest reform appeared to be mostly aimed at tackling inflation as the local currency value has nosedived since the country made economic reforms in 2002 to make payments and prices more realistic and introduce market freedom. North Korea also may have sought to flush out money hidden in the underground economy, some stashed by citizens working abroad.

• South Korean officials said they could not yet confirm the report, as North Korea has yet to make an official announcement as it did all in its previous reforms. A currency reform was always reported by the country's official media, led by the Workers' Party newspaper, Rodong Sinmun, on the day it was implemented as a decision by the Cabinet or a central government committee headed by then President Kim Il Sung.

• "There have been no reports so far of a currency reform in North Korean media," Unification Ministry spokesman Chun Hae-sung said. "We checked the state media today, including the Rodong Sinmun, but there was no such report."

• No signs of currency reform were detected yet in joint industrial projects, such as the factory park in the North Korean border town of Kaesong, where South Korean investors pay North Korean wages in dollars, the spokesman added.

• Yang Moon-soo, an economy specialist at the University of North Korean Studies in Seoul, said he believes the currency reform has both economic and political aims. North Korea wanted to shed heavy inflation pressure, and in the process of exchanging the denominations, the government would be able to discover and question those who have amassed wealth, he said.