N.K. currency sustains steep fluctuations

The North Korean currency has recently gained 20 percent against the Chinese yuan, a rare development blamed on rumors of the North’s counterfeiting, a source familiar with the issue said Friday.

The North Korean won was traded at 1,000 won to 1 Chinese yuan a week ago, but 1 yuan is now worth only 800 won in the country’s major northeastern city of Chongjin.

The source said, on condition of anonymity, that the demand for foreign currencies has surged on rumors a week ago that a lot of North Korea’s currency being circulated in the market was counterfeit.

The rumor quickly spread across the country via merchants who have mobile phones. However, it later turned out to be groundless, which helped the North Korean currency regain strength against yuan.

North Koreans favor Chinese yuan and U.S. dollars over their own currency after a botched currency reform as they believe foreign currencies are more stable, according to the Unification Ministry, which handles inter-Korean affairs.

In 2009, the North carried out a massive currency reform to try to rein in galloping inflation, squash free market activities and tighten state control over the economy. However, the measures failed to halt massive inflation and worsened food shortages and public backlash.

A North Korean defector in South Korea said there are several big shots in Pyongyang who manipulate exchange rates in the market by starting rumors such as the banning of foreign currencies.

In recent years, mobile phones have emerged as tools for spreading news in the isolated country where the communist regime tightly controls its 24 million people.

The number of mobile phone users in North Korea has jumped to more than 535,000 as of March, up 420 percent from the same time last year, according to Orascom Telecom, Egypt’s cell phone service provider in the North. (Yonhap News)