Summary: The Economist’s Big Mac Index, which compares the price of McDonald’s burgers in different countries to determine currency valuation, has shown that the yuan is the most undervalued it has been against the dollar since the 2007-09 global financial crisis. However, the index is limited by the fact that people buy different goods in different countries, making PPP conversion factors difficult. While Mr Trump, who previously promised to label China a “currency manipulator” during his presidential campaign, may be provoked by the index, he would be advised to hold off as the undervaluation of the yuan is not unusual.
purchasing power parity (PPP), which maintains that the real value of a currency is the amount of goods and services that you can buy with it, rather than the number on a trader’s terminal. (View Highlight)
