The Russian ruble has once again been named the world’s most undervalued currency on the “Big Mac Index,” a system invented by British magazine The Economist to assess “real” exchange rates, and purchasing power parity.
The index, developed in 1986, is a way to value countries’ currencies by measuring each against a common standard: the Big Mac hamburger sold in McDonald’s restaurants all over the world.
January’s Economist index ranked the ruble as being undervalued by 70% – the worst of 55 currencies surveyed.
The measurement helps to estimate the purchasing-power parity, or PPP, of national currencies, as well as their ‘real’ exchange rate.
At its present value, the dollar is equivalent to roughly 76 rubles. This is nearly triple what the price of the dollar should be (approximately 23 rubles) in order for the price of a Big Mac in Russia and the US to be equalized, The Economist reported.
The burger, currently costing $5.81 in the US, should cost around 440 rubles for the PPP of the two countries to be level. In fact, a Big Mac in Russia costs 135 rubles. This suggests that the Russian currency should be valued much higher than it currently is.
The ruble occupied similarly low positions in January and July 2020, and in January 2021 was also calculated by The Economist to be the most undervalued global currency. It dropped one spot to second place in July last year, having been undercut by the Lebanese pound.
The ruble is now back in last place, behind the Turkish lira, which is undervalued by 67.9%, and the Ukrainian hryvnia, at 58.1%.
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