While far from a perfect currency measure, The Economist’s ‘Big Mac Index’, which uses the relative cost of a Big Mac in different nations to calculate relative value for currencies, is at least far more tangible than many other currency valuation methods used.
It’s also been reasonably correct for the euro lately, signaling when the euro fell too far.
Now it’s saying the euro is over-valued:
he euro, despite its troubles, continues to be expensive when compared with many other rich-world currencies, though the British pound is trading close to its fair value. China’s recent decision to increase the “flexibility” of the yuan has not made much difference yet—the yuan is undervalued on the burger gauge by 48%.
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