Thursday, October 14, 2010

The Big Mac Index is Out

The index put out by Economist magazine is based on the purchasing power parity theory of currency value, which means a currency's exchange rate should reflect what it can buy in the market. The Big Mac Index is a clever, if simplistic way to measure purchasing power. Not surprisingly, China's yuan has the most undervalued currency, based on this index. Switzerland's currency, the franc, appears to be the most overvalued. Switzerland saw a huge flight into its currency earlier this year during the EU PIIGS's crisis.

1 comment:

  1. Hey! What about Australia? The AUD is on the verge of parity with the USD.