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11 Jan, 2019 11:24

Burgernomics: Big Mac index shows Russian ruble still deeply undervalued

Burgernomics: Big Mac index shows Russian ruble still deeply undervalued

The Russian national currency is one of the most underrated against the greenback, according to the January 2019 Big Mac Index which provides an assessment of the purchasing power of currencies against each other.

The index is a lighthearted guide showing how world currencies perform against the US dollar. It is based on price comparisons of McDonald’s Big Macs across the world, annually carried out by The Economist.

The indicator draws on purchasing-power parity theory, according to which exchange rates reflect the value of goods people can buy in any given currency.

According to the Economist, a Big Mac in the US costs $5.58, while in Russia the burger is priced at $1.65. The Big Mac price indicates this exchange rate undervalues the ruble by 70.5 percent, while the official exchange rate shows the difference of only 19.74 percent.

However, the burger’s real price totals 130 rubles, or $1.94, according to the official website of the Russian branch of the food chain. That means that Russian ruble is undervalued against the dollar by 65.1 percent.

According to the latest Big Mac stats, nearly all the global currencies are underrated against the US dollar apart from Swiss franc, Norwegian krone and Swedish krona. The Swiss franc was the world’s most overvalued currency, at 19 percent, versus the US dollar.

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