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THE ECONOMIST's Big Mac index shows US dollar overvalued against most global currencies
LONDON, July 12, 2018 /PRNewswire/ -- As global trade tensions continue to escalate, The Economist's latest Big Mac index shows the US dollar is overvalued against most of the world's currencies including the euro and the British pound by 16% and 30%, respectively.
Other highlights from this edition of the Big Mac index:
- Only the Swiss franc (19%) and Swedish krona (6%) look overvalued against the dollar
- The Norwegian krone now looks undervalued by 5%, having looked overvalued by 18% in January. This was due to McDonald's cutting the price of Big Macs by 14% rather than the dollar's strength against the krone
- The biggest mover from January was the Argentinian peso, whose recent collapse against the dollar took it from looking 25% undervalued to 51% undervalued now
- Egypt's pound is now the cheapest looking currency in the index; 68% undervalued against the dollar
- 13 new currencies were added to the index, all of which look undervalued against the dollar
The Economist's Big Mac index was first invented in 1986 as a lighthearted guide to whether currencies are at their "correct" level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.
Since its launch in print 32 years ago and as an online dashboard in 2012, the interactive Big Mac index has undergone its most radical change with this version. Based on thousands of user interactions and survey responses, the interactive dashboard has been optimised for mobile devices and simplified to make it more digestible for first-time readers while maintaining the depth of data and analysis that veteran users have come to expect.
The full report including the latest data and interactive graphic for 55 countries plus the euro area zone is available at www.economist.com/bigmac.
About The Economist (www.economist.com)
With a growing global audience and a reputation for insightful analysis and perspective on every aspect of world events, The Economist is one of the most widely recognised and well-read current affairs publications in the world. In addition to the weekly print and digital editions and website, The Economist publishes Espresso, a daily news app, Global Business Review, a bilingual English-Chinese product and Economist VR, a virtual-reality app. Economist Radio produces several podcasts a week and Economist Films produces short- and long-form video. The Economist maintains robust social communities on Facebook, Twitter, LinkedIn, Snapchat, LINE, Medium and other social networks. A recipient of many editorial and marketing awards, The Economist was recently named the most trusted news source in the 2017 Trusting News Project Report.
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SOURCE The Economist
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