Posted on: 17th January 2012 in Investments
The Economist is out with an updated version of their Big Mac index showing the world’s currencies price based on the world-famous McDonald’s sandwich:
THE ECONOMIST’s Big Mac index is based on the theory of purchasing-power parity: in the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries. This particular basket holds a McDonald’s Big Mac, whose price around the world we compared with its American average of $4.20. According to burgernomics the Swiss franc is a meaty 62% overvalued. The exchange rate that would equalise the price of a Swiss Big Mac with an American one is SFr1.55 to the dollar; the actual exchange rate is only 0.96. The cheapest burger is found in India, costing just $1.62. Though because Big Macs are not sold in India, we take the price of a Maharaja Mac, which is made with chicken instead of beef. Nonetheless, our index suggests the rupee is 60% undercooked. The euro, which recently fell to a 16-month low against the dollar, is now trading at less than €1.30 to the greenback. The last time we served up our index in July 2011, the euro was 21% overvalued against the dollar, but it is now just 6% overvalued. Other European currencies have also weakened against the dollar since our previous index, notably the Hungarian forint and Czech koruna, which have fallen by 23% and 16% respectively. Six months ago both currencies were close to fair value, but they are now undervalued by 37% and 18%.
We have 18 offices across the globe and we manage over $2billion for our 20,000+ clients
Get startedIn today’s world, much of our lives are lived online. From email accounts and social media profiles to digital wallets and online businesses, we’re building a digital legacy—often without realising...
Read moreWhen it comes to growing your wealth, choosing the right investment path can make all the difference—especially if you’re an expat managing finances across borders. Two of the most talked-about...
Read moreBuilding wealth is one thing—but building a legacy that lasts for generations? That’s something else entirely. For families, especially those living and working abroad, creating multi-generational wealth means more than...
Read moreLiving abroad as an expat can be one of life’s most rewarding adventures—but it also comes with its fair share of financial surprises. Whether you’ve relocated for work, lifestyle, or...
Read more