Dollar now overvalued - the Big Mac says so
11:26AM Friday July 06, 2007

NEW YORK - Currency dealers in the last four months have over-fed themselves on New Zealand dollars, according to the Economist magazine's latest Big Mac index released today.

The price you pay for a Big Mac in New Zealand is the equivalent of spending US$3.59. Americans pay US$3.41 in reality.

The conversion assesses the kiwi as five per cent overvalued against the US dollar.

Back in February, before the huge recent upwards run on our currency, the Economist calculated our dollar as two per cent undervalued against the greenback.

The index is a guide to how far currencies are from fair value and it is based on the theory of purchasing power parity which, in this case, means that exchange rates should make the cost of a McDonald's Big Mac burger the same in every country.

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