In the list of the world’s most undervalued currencies, the Russian ruble and the Lebanese pound are accompanied by the Malaysian ringgit (undervalued by 58.92%), Indonesian rupian (undervalued by 59.31%), and the Romanian leu (undervalued by 58.65%). Therefore, we can conclude that the market undervalues the Turkish currency by almost 68%. However, the lira is cheaper in Forex – about 13.42 lira per US dollar (as of January 2022). While the price of the burger in the United States is $5.81, the Turkish currency exchange rate is 4.30 lira per dollar in terms of the Big Mac Index. In 2019, the Russian ruble was the most undervalued (by 64.5%) currency worldwide.īig Mac costs $1.86 in Turkish. Thus, the Russian ruble is the world’s most undervalued (cheapest) currency according to the Big Mac Index. The Russian ruble exchange rate expressed in the Big Mac Index in January 2022 is 23.24 ruble per dollar.Ĭonsidering that the current market rate of the Russian currency is about 77.42 ruble, rather than 23.24 per US dollar, the ruble is undervalued by approximately 70%. In relation to the Russian Federation, it makes no sense in principle to make such calculations, since the ruble exchange rate is subject to sanctions and depends on the actions of the budget rule, which sterilizes a significant part of foreign exchange earnings for oil and gas in government reserves.The most relevant Big Mac Index so far (as of January 2022) is presented in the table below. The cost of other goods and services (wages, rental rate, payment for electricity, gasoline) is difficult to estimate using Big Mac index, since these spheres in each country differ in price. This, in particular, suggests that in Russia food is still cheaper than in America. Exactly so the national currency of the Russian Federation is undervalued against the dollar. By simple math actions, we get the difference of 70%. Now the burger in the USA costs $ 5.58, in Russia – $ 1.68. The current level of Big Mac Index against the rubleĪs of mid-January 2019, Big Mac index shows that the revaluation of the dollar has peaked in the last 30 years. Of course, these are approximate values, since real data depends on the specific price of the dish. Thus, a dollar is 40 times more valuable than a ruble. If we imagine that in Russia for a burger they give 200 rubles, and in the USA – 5 dollars, then when divided, the difference will be 40. The index is calculated as follows: the price of Big Mac in two countries with different currencies is compared to each other. It also includes the cost of renting the building, output, salaries and the price of products, which serves as additional factors for objectivity. Second, the components of a burger (bread, meat, cheese and vegetables) are universal in their need for the life of an ordinary person. As of 2019, the network is not represented in just 9 countries. First, Mc’Donalds restaurants are practically in the whole world. Well-known dish as an example is not just. It demonstrates whether the fair value of a single currency is fair. For the first time it was a comic action, but then the indicator’s solidity became obvious. What is Big Mac Index, why exactly the burger and what the indicator shows?Įvery year the financial publication The Economist publishes the Big Mac Index. According to the latest indicators of the index, the ruble is the most undervalued currency.
He determines the ratio of the exchange rate through the prism of the cost of the food basket, in this case, a burger from the popular fast food chain Mc’Donalds. However, they also play an important role in understanding what is happening. In addition to the obviously influential indices that determine the level of the financial economy (for example, Dow Jones), there are externally comical ones. Big Mac Index is a universal tool for assessing the correlation of currencies and purchasing power of people.