Erratic exchange rates

Source: http://finance.yahoo.com/currency/convert?amt=1&from=ZAR&to=KRW&submit=Convert

The past few weeks have been a financial rollercoaster. The problems on Wall Street are being felt all over the world, and some of the people that feel it most are those that work overseas and send money home, including yours truly (and every other English teacher in Korea). I have spent this time on the edge of my seat watching the exchange rates climb and fall, dragging my stress levels along for the ride.

Average Exchange Rates and Recent Fluctuations

The average exchange rate between the South Korean won (KRW) and the South African Rand (ZAR) since I arrived here in March 2008 has been between 125KRW/1ZAR and 135KRW/1ZAR. So an average monthy salary of 2,000,000 KRW has averaged out at between R16,000 and R14,800. But when the problems on Wall Street became evident in September, things started going a bit haywire.

Over the past two months or so, the exchange rate has gone from an average of 135KRW/1ZAR, up to over 150KRW/1ZAR (weak KRW/strong ZAR), and then all the way down to 114KRW/1ZAR (strong KRW/weak ZAR), and as of today somewhere around 130KRW/1ZAR. Heaven alone knows what the rate will be on Monday.

What do these fluctations mean? Well, at 135KRW/1ZAR, a salary of 2,000,000 KRW is about R14,800. At 150KRW/1ZAR the same 2,000,000 KRW salary is only worth R13,300. And then from that low, an exchange rate of 114KRW/1ZAR is worth R17,500. That’s R4000 difference in salary just on exchange rate fluctuations!

That kind of extreme fluctuation happened two weeks ago. The rate went from 150KRW/1ZAR to 114KRW/1ZAR within two days. So I sent money home to SA at the low point, and did pretty well. If I’d sent money earlier in the week I’d have lost a bundle. I think I got lucky, because I’m not sure where the exchange rate will go from here.

What’s going on?

At the moment, both the ZAR and the KRW are weak against the US dollar. Why this is the case, I can’t really tell you. But from what I understand it probably has to do with perceptions of relative weakness in the South African and South Korean economies. I say perceptions because the South African economy and financial system are very stable, not that international investors see it that way. Anyway, the US dollar is seen as safer than the ZAR or the KRW, so investors are pulling their money out of the South African and South Korean economies. This results in a drop in the relative value of the ZAR and KRW. Why people trust the US financial system even though they are the cause of the current problems (and of the Great Depression) is totally beyond my comprehension.

So at one point the KRW was taking a beating, while the ZAR was doing well. That’s when the exchange rate was terrible for anyone earning KRW. And then two weeks ago the ZAR all of a sudden took a huge dip against the US dollar, and the exchange rate with the KRW improved. Basically, both the ZAR and KRW were doing pretty badly against the US dollar. Misery loves company, and in this case it was a good thing for anyone earning KRW  and wanting to send money to South Africa.

Since then the exchange rate has been shooting up and down on a daily basis. I’m not going to send money home for a while, but for when I do I’ve picked an exchange rate range that will be reasonably ok. Anytime the exchange rate hits that, I’ll send money home.

So is it still worth it to work in Korea?

At the moment it’s still worth it to come and work in Korea. If you were American/Canadian/British – hell, anything other than South African – then it would probably not look so good. But since the ZAR and the KRW are both doing about equally badly against the US dollar, it should still be attractive to South Africans. However, the exchange rates are still incredibly volatile, and will likely keep going up and down for the next few months.

The worst exchange rate in recent years was during 2004, when it went as high as 190KRW/1ZAR (very weak KRW/strong ZAR). If that happened again then a salary of 2,000,000 KRW would only be R10,500. At that rate I would probably stay at home, or rather go to China, Taiwan or Japan.

For the moment things seem to have stabilised a little, but with the weak KRW my planned holiday to Japan is starting to look awfully expensive! I’ll be keeping a very close eye on the exchange rates, that’s for sure.

PS:

If you also want to keep an eye on the current rates, check out this link:

http://finance.yahoo.com/currency/convert?amt=1&from=ZAR&to=KRW&submit=Convert

The cheapest credit cards (what a mission!)

So I was at Standard Bank, ABSA and FNB yesterday trying to sort out my forex and questions about sending money home. This turned out to be a very tiring experience. Most of the time the staff at these banks had no idea what I was talking about, especially when I asked if they could supply me with Korean Won. Hahahaha. At any rate, a couple of them tried to sell me a “travel wallet”  or “travel card”, telling me that it would be cheaper than using a credit card.

So I thought I’d look at this. In theory it seems like a good idea. Load a card with your forex, and use it like a debit and ATM card at your destination, at the fixed exchange rate that you bought the forex at. Sounds like a good idea… except when you start looking at the costs. Just for an idea, you first need to purchase the card (between R50 and R100), then you need to pay to get it loaded, and then you pay each time you withdraw cash from a foreign ATM (at least R14). And to top it all off, since you can’t get one of these in Korean Won (only in US$, Euro, Pounds and AUS$), you pay an exchange fee to put the money on your card AND an exchange fee every time you use it in Korea. So I probably won’t be using this.

I’ll probably lump for some traveller’s cheques. I also looked into using a South African credit card in Korea. I heard it is tricky to get a Korean credit card, so I thought I’d take a a South African card along. I did some research last night into the costs involved, and was pleasantly surprised to find that VirginMoney seems to come out tops. Not only do they not charge an annual card fee, they have the cheapest ATM withdrawal fees. This is R8.75 at ANY ATM WORLDWIDE. Of course there will be some exchange fees involved and possible charges at the foreign ATM, but this is MUCH cheaper than what the other credit cards charge. Anything from R20 to R35 I think, for the same thing. And of course POS purchases don’t cost anything, except for the exchange rate fees.

I’m still looking to see if this is the best deal. In the meantime at least I know I can rely on my VirginMoney card if I’m in dire straits in Korea. Yay!

TB