English Translation (Google Translate): Toll-sized Starbucks latte prices are $ 1.53 in Cairo, Egypt and $ 5.76 in Zurich, Switzerland. This difference in prices indicates that some currencies are overvalued against the US dollar and that some currencies are undervalued.
The value of the dollar is determined daily by the $ 5 trillion foreign exchange market, but among investors, scholars and policy makers, the true value of the dollar remains controversial.
The financial community uses dozens of indicators to measure the value of the currency and determine the currency to be traded. Often, they tell different stories based on indicators. According to an index made by the American Diplomatic Association, the US dollar is 11% overvalued. In the index used by Peterson International Institute of Economics, the US dollar was overvalued by 5% in July.
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In recent years, as the political importance of each currency has increased, the implication of this discrepancy has been emphasized. US President Donald Trump repeatedly says he is saddened by the strength of the US dollar, which is attributed to the fact that trading partners maintain their currency weakness. US officials urged the International Monetary Fund to maintain a higher level of surveillance and include measures on currency manipulation bureaus in US trade transactions. But the effort to increase the value of the currency is complicated by confusing metrics used by institutions around the world.
For a long time, US policymakers have blamed the US for $ 500 billion in trade deficits annually and the fact that it is losing US jobs overseas because of unfair monetary practices. Countries such as China in the 1990s and 2000s intervened in the financial markets, weakening their currencies and making export prices cheaper. According to data from the IMF, the US dollar is overvalued by over 10%, and the export competitiveness of the United States is falling. In the case of the year, the dollar depreciated to less than 2%.
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China has repeatedly been accused of maintaining its currency weakness in order to gain a trade advantage. According to IMF data, the Chinese yuan was 25% undervalued compared to the dollar ten years ago, and the situation was overflowing with cheap Chinese export goods. Trump said during the presidential campaign, if he becomes president, he will point China as the currency manipulator on the first day of his inauguration. No such action has yet been taken. This is because most currencies recognize that the Chinese currency is no longer undervalued.
One of the most widely used methods for measuring currency value is to compare the price of a country by country. In the Wall Street Journal, tall-sized Starbucks latte prices in 29 countries around the world were counted to investigate which countries were miscalculated. Latte prices can be affected by factors such as national taxes, but the Wall Street Journal's Latte Index broadly reflects results from other valuation methods.