The Russian ruble is the most undervalued currency in the world on the Big Mac index
The Russian currency is expected to be worth 70% more against the US dollar – 23 rubles to the dollar, down from its current level of around 76.7 – British newspaper The Economist has calculated in its closely watched Big Mac index.
The Big Mac Index compares the price of the famous McDonald’s burger across the world to calculate whether national currencies are undervalued or overvalued. After accounting for differences in living standards – measured by GDP per capita – the ruble emerges as the most undervalued of the 55 currencies tracked by The Economist, by a measure dubbed “Burgernomic.
“A Big Mac costs 135 rubles in Russia and $5.81 in the United States. The implied exchange rate is 23.2. The difference between this and the real exchange rate, 77.4, suggests that the Russian ruble is undervalued by 70%,” The Economist said. noted Wednesday, referring to the market value of the ruble earlier in the week.
The ruble has come out as “undervalued” against the dollar on the index over the past decade.
The Russian currency had a rocky start to the year. Market volatility, fueled by fears of a Russian invasion of Ukraine, sent the ruble to its lowest level in 14 months and strength the country’s Central Bank to halt its usual purchases of foreign currencies in an effort to stem the slide.
Other world most undervalued currencies on the Big Mac Index also include the Turkish lira, which is undervalued by 67.9%, the Indonesian rupiah and the Malaysian ringgit – undervalued by 59.3% and 58.9% respectively. The Economist ranked the Swiss franc and the Norwegian krone as the most overvalued currencies in the world.