N. Korea cuts 2 zeros off currency notes: reports

South Korea's Yonhap news agency quoted North Korean foreign trading officials based in China as saying that the measure to remove two zeros from the nominal value of the won was implemented on Monday and triggered a rush of people trying to convert money into Chinese yuan or dollars on the black markets.

"The conversion rate was set at 100 to 1 and, accordingly, every 1,000 won bill is now being exchanged into a 10 won note," one official was quoted as saying.

"Black markets in Pyongyang have turned into chaos because residents rushed to convert the local currency into yuan or U.S. dollar," the official, referring to the capital city of the communist state.

South Korea's Unification Ministry said the government had received tipoffs about such a move but has been unable to confirm it was taking place, adding the North had made no attempt to hide similar moves in the past.

"In pervious cases, the North made the decision as a cabinet directive of the central people's committee proclamation, which is then reported by official media on that day," ministry spokesman Chun Hae-sung said.

North Korea's currency, called the won, like South Korea's currency , is officially quoted against foreign currencies but its actual value as recognised in black markets is known to be at a sharp discount.

Impoverished North Korea has connived at foreign-trading officials smuggling foreign currencies they earned abroad into the country in return for "donating" part of the hard currencies to the central government, Yonhap said.

This practice, amid the lack of a modern financial and monetary system, has sharply increased money supply in circulation and has recently contributed to lifting some asset prices such as luxury apartment flats, it said.

Years of economic mismanagement, natural disasters, the collapse of the Soviet Union and wide-ranging sanctions due to its nuclear programme have dealt severe blows to the North's economy for many years.

Reports of the denomination emerged a week before U.S. special envoy Stephen Bosworth was due to visit North Korea to discuss how to get Pyongyang to abandon its nuclear weapons programme and persuade it to return to stalled six-party talks.

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