Dollar falls beneath 1,000 Korean won; value at seven-year low
February 25, 2005
SEOUL — More bad news for servicemembers’ pocketbooks as the dollar fell below the 1,000 won mark Wednesday for the first time in almost eight years: South Korean financial analysts predict the dollar will continue its slide throughout 2005.
That means U.S. servicemembers, who are paid in U.S. dollars, will get fewer Korean won for each dollar they exchange.
Analysts from six leading institutions made their projections Tuesday, saying the exchange rates will continue to favor international currencies in comparison to the dollar. And on Wednesday the dollar closed at a seven-year low on the Korean currency markets after spending most of the day below the 1,000 won mark.
The dollar ended Wednesday trading at 1,003 won. The dollar dropped from 1,023 won at the end of Monday’s trading to 1,006 at the end of Tuesday’s session. The last time the dollar fell below the 1,000 won mark was in 1997, officials said.
One of the financial reports, from Morgan Stanley, predicted the dollar would stay below the 1,000 won mark consistently by the end of next month. The won has gained more than 15 percent against the dollar over the past year, Korea’s Central Bank says, in line with a similar trend of the Japanese yen.
Of 10 major world currencies, the bank said, the won has gained the most against the dollar in the past year.
The value of the dollar has been plummeting around the globe, and its exchange rate against the won is no exception. The military exchange rates used at on-base ATMs offer less generous exchange rates than the currency markets. On Wednesday, the posted exchange rate at a Community Bank branch on Yongsan Garrison was 993 won per dollar. To re-convert, it would take 1,043 won to buy one dollar.
Commercial rates typically reflect the rate for exchanging millions of dollars in a single transaction, rather than $60, for example, withdrawn from an ATM, officials have said.
Military officials try to cushion the rates for servicemembers. In South Korea, the cost-of-living allowance has increased at least three times in recent months to soften the blow. The most recent change put the rate at 32 cents, meaning a portion of every servicemember’s paycheck increases by almost a third.
That COLA rate likely will be reviewed in coming weeks, as results become available from the current financial survey among servicemembers. The survey, conducted through Feb. 7 by the 175th Finance Command, is an online list of questions that measure how servicemembers spend money, both on and off base, on things such as food, phone calls and other personal items.