Friday 25 July 2008

The Big Mac is back

From Economist.com comes the latest Big Mac Index.
THE Big Mac Index is The Economist's light-hearted guide to exchange rates. The index is based on the theory of purchasing-power parity, which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just one item, a Big Mac hamburger. The exchange rate that leaves a Big Mac costing the same everywhere is our fair-value yardstick. Many of the currencies in the Fed's major-currency index, including the euro, the British pound, Swiss franc and Canadian dollar, are overvalued and trading higher than last year's burger benchmark. Only the Japanese yen could be considered a snip. The dollar still buys a lot of burger in the rest of Asia too. China's currency is among the most undervalued, but a little bit less so than a year ago.
More information is available here, from the Economist website.

The full McCurrency menu is given below. The New Zealand dollar is 4% overvalued according to the Big Mac Index.

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