The Economist has released its so-called Big Mac index where Russian rouble finds itself in the top ten of the world’s undervalued currencies.
The index is a heart lighted guide to alignment of world currencies in regard to the US dollar and is based on comparing price for a McDonald’s Big Mac in various countries. In January 2013 a burger in Russia cost $2.43 at market exchange rates, while in the United States the price was $4.37. So the “raw” Big Mac index shows that the rouble was undervalued by 44.5%. This means, the US dollar exchanges to the Russian rouble at 1/30.5 rate, while its actual rate should be 1/16.69, according to the index.
Indian rupee tops the list of world’s undervalued currencies, while the Venezuelan bolivar sits on the other end of the ranking as the most overvalued national currency. This year’s edition evaluates 45 national money units.
The Big Mac index was invented by the Economist in 1983. It’s based on purchasing-power parity which shows the direction where exchange rates should be heading in the long run. The index has become a global standard and is included in several economic textbooks, according to the Economist.
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