Impact of dollar's decline starting to be felt by Americans living in South Korea
November 14, 2004
SEOUL — American Red Cross worker Pat D’Angelo moved to South Korea two months ago, just in time for holiday shopping. But in the past few weeks, she’s found the money she set aside for Christmas presents hasn’t been enough.
Staff Sgt. Edward Gunter, a Camp Humphreys soldier who lives off base, has seen his monthly bills jump by about $100 this fall even though he hasn’t added any new expenses.
Brian and Colleen Burgemaster have noticed the problem, too. When the couple reported to Humphreys this summer, each dollar they spent equaled nearly 1,200 won. But on Friday, after buying two jade vases in Seoul’s Itaewon district, Colleen pulled out a Community Bank ATM receipt to double-check the current exchange rate.
“It’s 1,084,” she said of the won value for every dollar taken from her bank account. “It’s not good.”
This week, the dollar reached a five-year low against the won. On Wednesday, the value of the dollar dropped to 1,102.00, according to the U.S. Federal Reserve Board. That means it would take 91 cents to equal a thousand-won note. In November 2000, the exchange rate hovered around 1,200 won for every dollar, meaning it took only 83 cents to buy a thousand-won note.
The sinking exchange rate mirrors much of what’s happening with the weakening dollar around the globe. Here on the peninsula, the news prompted concern from Seoul’s Wall Street about whether the rate signaled a stronger Korean economy or warned of a possible inflationary bubble about to burst.
For servicemembers and their families, the news means they need more money to pay for airline tickets, Christmas presents, utility bills, diesel gas, apartment rent and anything else bought off-base with won.
Air Force Master Sgt. James McGrath, an air traffic controller with the 51st Operations Support Squadron at Osan Air Base, lives off base in Songtan. He’s noticed in the past few weeks he’s spending more on fuel for his car, food, utilities and phone and Internet services.
As a first step to ease the impact, he’s being extra careful not to drive up household utility costs unnecessarily.
“I’ve been paying particular attention to that,” said McGrath. “I should have been doing that all along.”
He’s also hoping the cost of living allowance will catch up with the weaker dollar.
Servicemembers in South Korea began getting COLA just last year. COLA payments are meant to help people have the same purchasing power as they would at home, despite assignment to a more expensive overseas community.
In South Korea, the COLA last was adjusted Oct. 1. In Seoul, the rate went up slightly, said Sidney Keyes, staff accountant for 175th Finance Command in Seoul. The Korean COLA may be revisited at the beginning of December, he said this week.
Typically, Keyes and his staff survey the prices of 120 goods in different parts of Korea to see whether COLA should change. Occasionally, a substantial change in exchange rates also can prompt a COLA review, he said.
“If that trend persists, it’s conceivable there could be an increase,” he said Wednesday of the weakening dollar. “I would anticipate in December there could be another two-point increase.”
That would be a help to people like 2nd Infantry Division Sgt. 1st Class Craig Winbush. He was shopping in Itaewon on Friday for matching Louis Vuitton watches for himself and his wife.
Winbush has three more months in South Korea, and he and his friend, Warrant Officer Anthony Wright, both said in the past few months they’ve done more comparison shopping between the Internet and the streets of Itaewon to see where they can get the better deal.
On Friday, they weren’t too pleased with the Korean prices they saw.
“We were just in a store, and they wanted 109,000 won for a pair of tennis shoes,” said Wright, who’s going home to Indianapolis next week. “It’s still $100.”
The Burgemasters, of Camp Humphreys, had similar feelings about making their dollars stretch in South Korea. Brian, a captain who has lived most of his life in Seattle, was stationed in South Korea 13 years ago.
“You could get things a lot cheaper back then,” he said. He said he felt the strengthening won has helped Korean merchants raise their prices.
The weaker dollar posed an unwelcome Christmas season surprise for D’Angelo as well. She was shopping for mink blankets and other gifts Friday just outside the main gate of Osan Air Base in Songtan.
Friends who’d served in South Korea told her of bargain prices, but that was when the dollar was strong against the won.
“Obviously, you want to get stuff to send home to your family, and it hasn’t worked out quite as easily as I expected it to,” she said.
Korean business owners also have noticed the change, especially at places like travel agencies that cater to U.S. Forces Korea customers.
Amy Kim, the president of O&J Travel in Itaewon, said she dislikes accepting dollars because of their declining value. But she knows it means her customers are likely to pay more now for airfare or tours than a few months ago.
The “$500 you paid for your air ticket at the beginning of this year now costs up to about $550 due to devaluation of the U.S. dollar,” she said.
Despite that, however, she didn’t think she was losing any business.
“We still have many American customers, as usual,” she added. “I don’t think the weakening dollar prevents them from taking trips abroad in Korea.”
It is, however, making Gunter think about conserving energy at Humphreys. Gunter, a medical sergeant-in-charge with Headquarters and Headquarters Troop, 6th Cavalry Brigade at Camp Humphreys, lives with his family in an apartment in the Anjung-ri section of Pyongtaek.
With the dollar down, their latest utility bill shot up by about $100 over the previous month’s bill. Just converting dollars to won was about $50 more than usual, said Gunter.
“The way I live, there’s pretty much nothing I can change,” he said. “I just really have to watch what I do in my apartment.”
There is, however, at least one choice when it comes to spending money for people like the Burgemasters.
The Community Exchange rate they got on Friday — 1,084 won for every dollar — is slightly worse than the commercial rates given by the Federal Reserve and published in many daily newspapers.
Those commercial rates typically reflect the rate for exchanging millions of dollars in a single transaction. When the amount exchanged is smaller — say, getting $60 from an ATM — an institution like Community Bank will adjust the rate so it can still make a small profit for the service, Keyes, the military accountant, said.
But there are other choices. On Friday, a money exchange office in Itaewon offered 1,110 won for every dollar.
Still, Brian Burgemaster said he couldn’t complain too much about the costs of living in South Korea.
“It’s still cheaper compared to Seattle.”
Franklin Fisher and Hwang Hae-rym contributed to this report.