Polish Zloty Foreign Exchange


Polish zloty foreign exchange rate 43 percent undervalued according to “Big Mac Index”

Published on January 3, 2012 by   ·   No Comments

According to The Economist’s Big Mac index, the Polish złoty’s foreign exchange rate is undervalued against the US dollar by approximately 43 percent, the most in 18 months and the second largest discount in Europe, after the Russian ruble.

The Big Mac Index is based on the theory of purchasing power parity and uses the price of the McDonald’s Big Mac to compare the values of different currencies.

In Poland, the cost of the McDonald’s sandwich is 8.80 Polish zloty. That price translates to $2.55 US dollars, which means the cost of the burger is about 43 percent lower in Poland than in the US.

This in turn indicates that the Polish zloty’s foreign exchange rate is undervalued by about 43 percent against the US dollar.

It is expected that the Polish currency will rise in value this year.

“The Polish economy will fare better than others in the region and that should affect the złoty,” Juraj Kotian, an economist at Erste Bank said.

In 2011, the Polish zloty lost approximately 14 percent against the US dollar and 11 percent against the euro currency.

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