Saturday, July 30, 2011

Currencies forecast - Big Mac index

Economist Magazine has changed the way the calculation of the Index BIG - Mac, which examines the world's foreign exchange rates based on the price of a Big patty - Mac restaurants McDonald's, based on the assumption that it represents the purchasing power of currency.
The new calculation method is based on the same basic principle of the famous hamburger price comparison in different countries, but unlike the original index, also plays in calculating per capita GDP of each country. According to the Economist, the change is because prices in poorer countries that are cheaper because labor costs are lower , as evidenced by the strong positive correlation between the dollar price of Big Mac and GDP per capita.
For example, the updated index against the dollar was trading higher at the gate by 43% fair value, while according to the old version of this index was strong in 15% of its real value against the dollar.
China's currency, the yuan, was trading slightly above the real value against the dollar by the updated index, while the old index on the Chinese currency was trading lower at 44% of its value.
According to the updated index, the excessive currency exchange traded against the dollar is the currency of Brazil, the Real, which was trading higher at the gate value 149% fair

.According to gross index strengthen the real version 52% against the dollar.
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