Why is the USD weakening simultaneously with the economic skyrocketing?
The artificial disappointment with soaring inflation helps US producers to export their goods cheaper
The Big Mac Index indicates the inconvenience which causes the high US Dollar
Let's imagine a currency which has a great economy behind it, the economy is doing well, the unemployment rate is at the 16-year low level, the local stock market is soaring to record highs and the central bank has hiked the interest rates thrice during last 10 months. It seems great, and it makes us believe that this currency would surge as long as there is not any great depression. At first glance, it is rather unbelievable that during the above-mentioned period the national currency can touch its 15-month lows without any intervention.
So, let's forget about the illusion and let's come back to reality. The described situation refers to the USD. The US economy is doing very well, but the USD is heading to the opposite direction.
Firstly, the market was acting on behalf of the USD, as the rate hikes supported the US Dollar Index to increase from 95 to 103 points …show more content…
In the USA average price of a Big Mac in July 2017 was $5.30. The 1st destination for US exporters is the European Union, a Big Mac is available for 4.47 $ there, which means that you should pay 15.8 % less. The second is Canada, where you can buy a Big Mac for 4.66$, which is 12.2 % cheaper than in the USA, the third importer of US products is Mexico, where the Big Mac's cost is 2.75$, it means you have to pay 48% less than in the USA, the 4th largest export destination is China, where the Big Mac would cost you 2.92$, which is 45% cheaper than a Big Mac in the USA. These statistics indicate the great overvaluation of the US Dollar against other major currencies, which means that it has a great disruptive effect on US
The artificial disappointment with soaring inflation helps US producers to export their goods cheaper
The Big Mac Index indicates the inconvenience which causes the high US Dollar
Let's imagine a currency which has a great economy behind it, the economy is doing well, the unemployment rate is at the 16-year low level, the local stock market is soaring to record highs and the central bank has hiked the interest rates thrice during last 10 months. It seems great, and it makes us believe that this currency would surge as long as there is not any great depression. At first glance, it is rather unbelievable that during the above-mentioned period the national currency can touch its 15-month lows without any intervention.
So, let's forget about the illusion and let's come back to reality. The described situation refers to the USD. The US economy is doing very well, but the USD is heading to the opposite direction.
Firstly, the market was acting on behalf of the USD, as the rate hikes supported the US Dollar Index to increase from 95 to 103 points …show more content…
In the USA average price of a Big Mac in July 2017 was $5.30. The 1st destination for US exporters is the European Union, a Big Mac is available for 4.47 $ there, which means that you should pay 15.8 % less. The second is Canada, where you can buy a Big Mac for 4.66$, which is 12.2 % cheaper than in the USA, the third importer of US products is Mexico, where the Big Mac's cost is 2.75$, it means you have to pay 48% less than in the USA, the 4th largest export destination is China, where the Big Mac would cost you 2.92$, which is 45% cheaper than a Big Mac in the USA. These statistics indicate the great overvaluation of the US Dollar against other major currencies, which means that it has a great disruptive effect on US