LONDON The Chinese yuan is at fair value to the dollar, at least when measured in hamburger terms, The Economist said on Thursday.
Celebrating the 25th anniversary of its Big Mac Index, the London-based publication said its latest calculations also showed the euro significantly overvalued against the dollar and the Brazilian real to be the world's most overvalued currency.
The index uses McDonald's signature big burger to calculate relative values between currencies.
It is based on the idea that with most of the food item's ingredients being sourced locally, in a perfect world the price should be the same. But it has started tweaking this to account for the relationship between prices and gross domestic product (GDP) per person.
Hence, on a simple price basis the Big Mac index implies that the yuan is 44 percent undervalued to the dollar.
But The Economist argues that burgers should be cheap in emerging economies where wages are low. So when the relationship between prices and GDP per person is taken into account, the yuan becomes close to its fair dollar value.
The newspaper said that in future it was going to include India's rupee, a currency that has caused index difficulties because McDonald's does not sell Big Macs in India.
Instead, the index will now use the "Maharaja Mac," which is made of chicken.
"As meat accounts for less than 10 percent of a burger's cost, The Economist believes it is unlikely to distort results hugely. The new index suggests that the rupee is 8 percent undervalued," it said.
(Reporting by Jeremy Gaunt; Editing by Ruth Pitchford)