North Korean money changers have reaped substantial profits from recent currency fluctuations. While money changers have increased their foreign currency assets in a short period, market traders are sighing deeply over accumulated losses.
A Daily NK source in North Hamgyong province said recently, “In Hoeryong, some money changers made over 10,000 yuan ($1,370) in profit in just one month by exploiting exchange rate fluctuations,” adding, “This was possible because the yuan exchange rate rose by 1,000 won in a week and fluctuated sharply over short periods.”
According to the source, the North Korean won-to-yuan exchange rate in Hoeryong rose to the 6,000-won range at the end of last month before falling below 5,000 won this month. Some money changers reportedly pocketed considerable profits from the spread during this process.
Money changers made profits by selling yuan when the exchange rate suddenly spiked, then buying yuan again when the rate dropped.
One person, who works as a money changer in Hoeryong, earned about 20,000 yuan in profit recently by exploiting exchange rate fluctuations.
When the yuan exchange rate soared to the 6,000-won range at the end of last month and then dropped to the mid-5,000-won range in early this month, this individual anticipated further decline and quickly sold some yuan holdings. As the exchange rate continued to fall, they bought yuan again, and when the rate turned upward again, profited from the exchange rate spread.
Retail traders bear the brunt
While money changers have made large profits by exploiting sharp exchange rate fluctuations, merchants doing retail business in the markets are suffering losses due to exchange rate instability.
Regarding this, the source said, “For people who are barely scraping by because business in the market isn’t great to begin with, sudden spikes in the exchange rate are like a ticking time bomb,” explaining, “They’d lose less if they only dealt in Chinese money, but they often receive payment for goods in North Korean won, so they lose money even when they sell goods.”
The source continued, “Money changers normally make an exchange rate profit of about 10 to 50 won per yuan, but these days the exchange rate fluctuates by hundreds of won, creating money-making opportunities,” adding, “Ordinary people are finding it harder to make ends meet because of the exchange rate, while moneyed people with foreign currency are making even more money — what a contradictory reality this is.”
Moreover, since wholesale merchants mostly deal in foreign currency, the more volatile the exchange rate, the greater the losses for retail merchants who purchase goods in foreign currency and sell them in local currency.
Additionally, retail merchants are in an awkward predicament because suddenly raising prices in response to the exchange rate immediately leads to poor sales.
As exchange rate instability continues, widening inequality is becoming apparent in North Korean society. While the moneyed class, who view foreign currency as a safer asset than local currency, are building wealth by exploiting exchange rate fluctuations, people making a living through retail business are sinking deeper into poverty.
The source remarked, “Market traders need to make a profit from selling goods to maintain their livelihood, but the more they sell, the more their losses accumulate, so their livelihoods can only get harder,” adding, “Even when times are difficult, wealthy people make profits and live better, but ordinary people keep getting poorer — that’s the reality right now.”
