The Ukrainian hryvnia has been ranked the world`s most underestimated national currency, according to The Big Mac index for July 2016 compiled by The Economist.
According to the data, Ukraine`s national currency is underestimated by 68.8% against the U.S. dollar and by 62.6% against the euro.
The estimated value of the dollar against the hryvnia is 7.74 UAH/USD, in comparison with the current rate of 24.8 UAH/USD, according to the report. The estimated value of the euro against the hryvnia is 10.21 UAH/EUR, against the current rate of 27.3 UAH/EUR.
Besides Ukraine, the group of countries whose national currencies are underestimated by 50% or more also includes Malaysia, Russia and South Africa.
The Russian currency, according to the index, is underestimated by 59.3% against the U.S. dollar and by 51.3% against the euro.
UNIAN memo. The Big Mac index was invented by The Economist in 1986. It is based on the theory of purchasing-power parity, the notion that in the long run exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America in July 2016 was $5.04; in China it was only $2.79 at market exchange rates. So the ”raw” Big Mac index says that the yuan was undervalued by 45% at that time.
Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies.
