The Russian Ruble Was Recognized As the Most Undervalued Currency in the World
OREANDA-NEWS. The Economist magazine ranked the ruble as the most undervalued currency in the world according to the Big Mac index.
The calculation is used to determine purchasing power parity (PPP) and calculate "real" currency exchange rates. For the calculation, the authors took one standard product that can be bought in most countries of the world, but at different prices in terms of other currencies. At the same time, to calculate the PPP, a hypothesis is used, according to which the same product should cost the same in all countries of the world. A different situation indicates an undervalued or overvalued local currency.
The publication took an ordinary Big Mac as an example, which in the USA in January 2021 costs an average of $ 5.66, and in Russia - 135 rubles ($ 1.81). To "equalize" the value, the dollar must cost 23.85 rubles, while in reality it costs more than three times more.
As a result, according to experts, the ruble exchange rate is undervalued by 68 percent, and, taking into account the adjustment for the country's GDP per capita, by 47.3 percent, which ultimately makes the Russian currency the most undervalued in the world.
The other currencies with the most undervalued were the Hong Kong dollar (by 46.8 percent) and the Turkish lira (by 39.7 percent).