CHART: The most overvalued and cheapest currencies in the world

Photo: China Photos/Getty Images

The Chinese yuan remains the most expensive currency in the world, according to Deutsche Bank’s latest modeling on FX valuations.

Using a trio of fundamental valuation indicators including purchasing power parity (PPP), Deutsche Bank’s behavioural equilibrium exchange rate (DBeer) and fundamental-equilibrium exchange rate (FEER), the bank has come up with this great chart showing which currencies are currently the most expensive in the world and which are the cheapest.

Source: Deutsche Bank

It’s a beauty, right.

The black line is an average of the indicators, and the further out from the centre it sits, the cheaper the currency is perceived to be.

Deutsche has even ordered them in a clockwise direction, moving from cheapest to most expensive.

Nice.

Based on the three metrics, Deutsche determines that the Chinese yuan is currently the most expensive currency, beating out the likes of the Swiss franc, Philippines peso and Brazilian real for that title.

At the other end of the spectrum, the Japanese yen, Turkish lira, Mexican peso and Swedish krona are perceived to be the cheapest currencies in the world of those analysed.

While the three valuation models are based on trade flows and trade arbitrage, Deutsche says that they do not capture the growing importance of increased capital flows since the 1990’s, suggesting that other valuation metrics may present different results to what is shown in the chart above.

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