Major Developed Market Currencies | |||
|---|---|---|---|
| Country | Exchange Rate | Relative Valuation | -80 -60 -40 -20 0 20 40 60 80 100 |
| United States Dollar | 1 | 0% | |
| Euro | 1.3086 | 10.51% | |
| Japanese Yen | 0.0101 | 1.47% | |
| British Pound | 1.5403 | 4.28% | |
| Canadian Dollar | 0.9664 | 19.64% | |
| Australian Dollar | 0.9525 | 48.21% | |
| Swiss Franc | 1.0620 | 72.47% | |
| Swedish Krona | 0.1516 | 40% | |
| Norwegian Krone | 0.1720 | 87.33% | |
| New Zealand Dollar | 0.7933 | 32.24% | |
Major Emerging Market Currencies | |||
|---|---|---|---|
| Country | Exchange Rate | Relative Valuation | -80 -60 -40 -20 0 20 40 60 80 100 |
| Chinese Yuan | 0.1632 | -30.46% | |
| Russian Ruble | 0.0311 | -20.51% | |
| Brazillian Real | 0.4687 | -8.09% | |
| Indian Rupee | 0.0176 | -60.81% | |
| Mexican Peso | 0.0779 | -29.34% | |
All | |||
|---|---|---|---|
| Country | Exchange Rate | Relative Valuation | -80 -60 -40 -20 0 20 40 60 80 100 |
| Australian Dollar | 0.9525 | 48.21% | |
| Argentina Peso | 0.1890 | -37.48% | |
| Brazillian Real | 0.4687 | -8.09% | |
| Canadian Dollar | 0.9664 | 19.64% | |
| Chilean Peso | 0.0020 | -17.78% | |
| Chinese Yuan | 0.1632 | -30.46% | |
| Colombian Peso | 0.0005 | -33.11% | |
| Czech Koruna | 0.0508 | -31.68% | |
| Danish Krone | 0.1755 | 52.61% | |
| Egyptian Pound | 0.1431 | -54.88% | |
| Euro | 1.3086 | 10.51% | |
| Honk Kong Dollar | 0.1288 | -28.34% | |
| Hungarian Forint | 0.0044 | -33.51% | |
| Indian Rupee | 0.0176 | -60.81% | |
| Indonesian Rupiah | 0.0001 | -26.72% | |
| New Israeli Sheqel | 0.2727 | 0.68% | |
| Japanese Yen | 0.0101 | 1.47% | |
| Lithuanian Litas | 0.3790 | -32.5% | |
| Malaysian Ringgit | 0.3243 | -36.63% | |
| Mexican Peso | 0.0779 | -29.34% | |
| New Zealand Dollar | 0.7933 | 32.24% | |
| Norwegian Krone | 0.1720 | 87.33% | |
| Pakistani Rupee | 0.0101 | -55.85% | |
| Peruvian Nevo Sol | 0.3677 | -39.59% | |
| Philippine Peso | 0.0238 | -38.17% | |
| Polish Zloty | 0.3050 | -38.39% | |
| Russian Ruble | 0.0311 | -20.51% | |
| Saudi Riyal | 0.2666 | -12.69% | |
| Singapore Dollar | 0.8006 | -16.1% | |
| South African Rand | 0.0999 | -42.5% | |
| South Korean Won | 0.0009 | -26.34% | |
| Sri Lankan Rupee | 0.0079 | -50.02% | |
| Swedish Krona | 0.1516 | 40% | |
| Swiss Franc | 1.0620 | 72.47% | |
| New Taiwan Dollar | 0.0335 | -47.94% | |
| Thai Baht | 0.0327 | -40.62% | |
| New Turkish Lira | 0.5290 | -29.43% | |
| Ukrainian Haryvnia | 0.1226 | -44.71% | |
| United Arab Emirates Dirham | 0.2723 | 33.02% | |
| British Pound | 1.5403 | 4.28% | |
| United States Dollar | 1 | 0% | |
Tables last updated on 06/05/2013.
Purchasing Power Parity (PPP) is a method for determining where the currency exchange rate "should" be. The theory is that currency exchange rates between two countries should be at a level where goods can be purchased at the same price in either country. For example, if the price of an identical item is cheaper in Canada than in the U.S., than the Canadian Dollar is considered undervalued and its value is likely to rise against the Dollar.
While, PPP determines exchange rates in the long term, it has next to nothing to do with short term fluctuations. News, interest rate changes, inflation expectations, and growth expectations have more to do with short term exchange rates than PPP.
Above we have a table with the PPP implied relative valuation to the U.S. Dollar, using data from the IMF. Green bars indicate a currency that is undervalued, and red bars, an overvalued currency. Keep in mind that an undervalued currency is not guaranteed to rise, valuations can be affected by other factors such as inflation and constraints of trade.
Purchasing Power Parity valuations are best used along with other indicators, such as interest rates and momentum. This is what we do in our currency rotation strategy.