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2w ago

Argentine Peso Swings to Undervaluation as Official Rate Climbs in July

Easing of currency controls alongside a weaker dollar has sent the peso below its purchasing power parity benchmark

El índice se construye a partir del precio de la Big Mac, la clásica hamburguesa de McDonald’s.
Image
The Economist indica que la hamburguesa Big Mac cuesta US$6,01 en Estados Unidos, mientras que en el país ese mismo producto vale $6600.

Overview

  • In July the official peso–dollar rate rose by 5.4% after the government eased long-standing exchange controls and ended a key agro-export liquidation window.
  • The Economist’s Big Mac Index now records the peso as 14.6% undervalued based on a US$6.01 reference price versus AR$6,600 in Buenos Aires.
  • When adjusted for GDP per capita, the peso still appears 17% overvalued, implying the local Big Mac should cost 27% less.
  • Global dollar weakness in July as well as seasonal export drivers underpinned gains in regional currencies such as the Brazilian real, which the index marks as 28.4% undervalued.
  • The Swiss franc remains the most overvalued currency at 49.6% in the Big Mac ranking, followed by the Uruguayan peso at 29.6% and several European currencies.