FW: Beefed up

The Vietnamese Dong joins our Big Mac index TRAFFIC was heavier than normal in Ho Chi Minh City on Monday February 10th as McDonald's opened its first branch in Vietnam. Mostly motorbikes queued in the new "drive-thru", while hundreds waited under the golden arches and Ronald McDonald posed with customers. The opening allows us to add the Vietnamese Dong to our Big Mac index, our light-hearted guide to currencies. It is based on the theory of purchasing-power that in the long run exchange rates should move to equalise the price of an identical basket of goods and services in two countries. Our basket contains only one good, a Big Mac burger.  Since a Big Mac costs 60,000 Dong, or $2.84 at market-exchange rates, compared with $4.62 in America, our index suggests the Dong is undervalued by 39% against the dollar. The currency, which is loosely pegged to the dollar, has been stable since June when the country's central bank depreciated it by 1% against the dollar to help improve the balance of payments. Keeping the exchange rate low has helped boost exports. Vietnam's trade balance turned back...Continue reading

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