Learn about the value of the UAE dirham on the "Big Mac" index
The "Big Mac" index, prepared by the British "Economist" magazine, showed that the dirham is undervalued by 29.1%, compared to the purchasing value of the traditional "Big Mac" burger from the McDonald's company.
This percentage is close to that recorded a year ago, as the dirham was undervalued against the dollar by about 29.2%.
The fair value was 2.60 dirhams per dollar according to the "Big Mac" index in January 2020, compared to 29.7% at 2.58 dirhams per dollar in the index last July.
The price of the sandwich in the UAE is 14.75 dirhams, compared to 5.66 dollars in the United States.
It is assumed that the fair value of the dirham is 2.61 dirhams to the dollar, compared to the current exchange rate of 3.67 dirhams to the dollar.
The idea of the index is based on considering the price of the Big Mac sandwich as a unified measure of the fair value of global currencies. The index assumes that the price of the sandwich should be the same in all countries of the world, and the difference in prices, according to The Economist, reflects an imbalance in currency valuation.
On the basis of this, the dirham is undervalued by about 22.2% against the euro, where the price of the sandwich in the UAE reaches 14.75 dirhams, compared to 4.25 euros in the European Union region, which is assumed to be the fair value of the dirham is 3.47 dirhams per euro, against the current exchange rate 4.46 dirhams per euro.
The dirham is undervalued by about 9.5% against the pound sterling, and the fair value is 4.48 dirhams per pound sterling, compared to a real exchange rate that currently stands at 4.95 dirhams per sterling.
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