November 08, 2010 13:20
The strong won has sent Korea's so-called Big Mac Index soaring 7.44 percent in the last three months. The Big Mac Index is compiled by British weekly the Economist comparing the prices of the eponymous McDonald's hamburger in dollars.
If a country's price of the burger converted into dollars is less than the U.S. price, it means that the country's currency is undervalued.
Based on the exchange rate of Oct. 13, Korea's Big Mac Index was US$3.03, up 7.44 percent from US$2.82 in July. Given that a Big Mac in the U.S. costs US3.71, the won is about 18 percent undervalued.
China's Big Mac Index is just US$2.18, 40 percent undervalued.
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