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Ordinary Koreans Feeling Plummeting Won’s Effects

Posted October. 10, 2008 03:16,   


A Korean scholar who went to the United States as an exchange professor two years ago returned home alone last year, leaving his wife and children behind. He suffered from loneliness at first, but now faces a bigger problem.

“I send my family 3,500 to 4,000 (U.S.) dollars a month, but I spent about 800,000 won more this month to send the same amount of dollars,” he said. “I don’t have a bundle to convert to dollars in a lump. So I dread the won’s decline.”

His wife is fully aware of his suffering, with his friend quoting her as saying, “I feel for him since the won-dollar exchange rate has reached almost 1,400. It’s time to return home.”

Students studying abroad also feel the pinch from the weaker won. Park Se-yeong, 28, is preparing for graduate school while interning at a non-governmental organization in the United Kingdom.

“My parents send me one million won a month, but inflation has almost doubled,” Park said. “College students are scrambling to land part-time jobs and some couldn’t afford to buy textbooks on time.”

A company arranging overseas study programs for children is getting a couple of calls a day from parents who want to bring their children home at a proper time. Many who sent their children to the United States or the Philippines for two to three years of language study are cutting it short after one year, the company said.

One office worker borrowed 6,000 dollars from his brother to buy a car Sept. 12. At the time, he owed his brother 6.6 million won since the won-dollar rate was around 1,100. But the debt has ballooned to eight million won due to the declining won. “I intended to repay when my installment deposit matured at the end of this month. But that’s impossible because of the skyrocketing exchange rate,” the worker said.

Another office worker is considering postponing a trip to New York she has saved for since the end of last year. She wants to visit her boyfriend who studies there, but the thought of spending an extra 700,000 to 800,000 won because of the weaker Korean currency is weighing heavily on her.

Much more fortunate, however, are those who hoarded dollars in Korea and invested in dollar-denominated financial package.

Certain small businessmen who amassed dollars from international trade or those who have a small amount of dollars left from overseas travel are profiting from converting dollars to won.

Jeong Byeong-min, portfolio management chief at Woori Bank, said, “We deal with five to six currency exchange transactions a day. Some convert more than 500,000 dollars to won.”

A resident of southern Seoul recently terminated a foreign currency-denominated insurance policy he purchased for 500,000 dollars in 2005. Though the policy’s surrender value was 493,700 dollars, less than the amount he initially put in, the greenback gave him a profit of 32.6 percent when converted to won.

The won’s freefall, however, benefits only a small number of people as most fear a deteriorating situation.

An executive working for a U.S. financial institution battered by a liquidity shortage said things have dramatically changed overnight.

“A while ago, my daughter who is attending high school in the United States called me and said in a breaking voice, ‘Are you okay, Dad? I will try hard to earn a scholarship,’” he said.

rews@donga.com legman@donga.com