The KRW (South Korean Won) is the official currency of the Republic of Korea (South Korea). As the lifeblood of the world's 10th largest economy, the Won is a significant player on the global stage, even if it doesn't have the celebrity status of the US Dollar or the Euro. Its official currency code is KRW, designated by the ISO 4217 standard. The Bank of Korea is the central bank responsible for issuing the Won and managing the country's monetary policy. One of the first things you'll notice about the KRW is the sheer number of zeros. A simple lunch can easily cost ₩10,000. Don't panic! This is due to a history of inflation and currency reforms. It simply means the base unit is small, and it doesn't mean your wallet is emptying at lightning speed. For investors, the Won is more than just tourist money; it's a barometer for the health of global trade and a key factor in the performance of some of the world's biggest technology and manufacturing companies.
For a value investor, looking at a country's currency is like checking the weather before a long journey. You don't just care about the destination (the company you're investing in); you also care about the conditions you'll face along the way. The KRW's movements can significantly impact your returns from South Korean investments, either by providing a surprise tailwind or a frustrating headwind.
If you're investing in South Korean corporate titans like Samsung Electronics or Hyundai Motor Company, whether directly on the Korean exchange or through ADRs (American Depositary Receipts), the KRW's value is a big deal. These companies are global export machines, earning a large portion of their revenue in foreign currencies like the USD and EUR. Here’s the simple logic:
Understanding this dynamic is crucial. A brilliant company's stock performance can be muted or even erased by unfavorable currency swings if you're a foreign investor.
The Won's value isn't random; it dances to the tune of several key economic and political factors.
Let's see how currency risk can affect your bottom line. Imagine you, an American investor, buy ₩12,000,000 worth of shares in a promising Korean company.
A year later, the company has done well, and your stock is now worth ₩13,200,000—a tidy 10% gain in local currency terms. You decide to sell and bring your money home. However, the KRW has weakened against the dollar.