Forex
 
 
Home
About us
Forex Resource
What is forex  
How does forex works
FAQ
New to forex trading
Technical Analysis
Fundamental Analysis
Major Indicator
Forex vs Stocks Market
Forex Glossary
Contact us
Sitemap
Currency Converter
Others**
Domainji.com  
Snaidu.com
Snaidu.us
Ommail.com
**
 

Informative Articles**

Trading Analysis: The Big Mac

The Big Mac Factor... And What It Means to You

When "experts" say the dollar is "overvalued and about to crash," what exactly is it that they're talking about? How do they know?

It turns out, they don't know what they're talking about... as the U.S. dollar is not undervalued or overvalued versus the major currencies of the world, based on how much a dollar buys, versus how much a euro or a yen buys (this is based on a rather complicated calculation of "purchasing power parity," or PPP).

Fortunately, The Economist magazine invented a novel way to show PPP that everyone can understand. According to the May 29, 2004 issue of the magazine, the editors invented the Big Mac Index "in 1986 as a light-hearted guide to whether currencies are at their 'correct' level."

The magazine simply asks McDonald's for the U.S. dollar price of a Big Mac all over the world (McDonald's serves burgers in 120 countries). As of May 29, a Big Mac was 13% more expensive in Europe than in the States. However, in Japan, a Big Mac was 20% cheaper.

My take on this is that the U.S. dollar likely won't crash or soar against these major currencies, based on this indicator. The brutal truth is that the dollar isn't much overvalued or undervalued.

The currency world sure is a much more boring world today than many commentators would have you believe. It was a different story back in 1995...

A Big Mac

in Japan was 100% more expensive than a Big Mac in the States. Not surprisingly, over the next few years, the Japanese yen crashed. In 1995, at the yen's peak, it only took 80 yen to buy one U.S. dollar. By mid-1998, it took nearly twice as many yen to buy one U.S. dollar.

If you had been smart enough to recognize the huge overvaluation of the yen in 1995 - and the Big Mac Index was one very simple way you could have done that - then you could have profited enormously as the yen weakened.

Currency Trading: Much Ado About Nothing, at the Moment

I don't expect you to turn into a currency trader. And the great thing is, right now, you don't need to be an expert on currencies - you don't need to transfer your money back and forth from yen to euros to dollars... why? Because the world's paper currencies are fairly in line with each other - a Big Mac costs the same in the countries of the world's major currencies.

The next time a Big Mac hits $6 a burger in Tokyo, I'll let you know.

======http://www.australiansharetrading.com/ the complete online resouse for share trading Please use this aricle, you have my prior consent to do so, just don't change a thing.australian share trading By Nik Halik => http://www.australiansharetrading.com offers share trading news

About the author:
None
 
A Beginnerís Guide to FOREX
FOREX is the abbreviation for the Foreign Exchange market. FOREX is basically an international exchange market where currencies from all over the world are bought and sold for profit. The market today began in the 1970ís. FOREX is a very unique...

An Explanation of Forex Trading
Forex trading means the simultaneous buying of one currency, and selling of another. The currency of one country is exchanged for that of another. The currencies are always traded in pairs such as US Dollar/Japanese Yen (USD/JPY), Euro/US Dollar...

Forex Trading And The Characteristics Of Bar And Candlestick Charts.
There is a very important factor that you should consider with great care if you are willing to become a successful and profitable Forex trader. This always important tool; in other words knowledge, that should be always present in your...

Hawala, or The Bank That Never Was
I. OVERVIEW In the wake of the September 11 terrorist attacks on the USA, attention was drawn to the age-old, secretive, and globe-spanning banking system developed in Asia and known as "Hawala" (to change, in Arabic). It is based on a...

On the Soundness of Our Banks
Banks are institutions where miracles happen regularly. We rarely entrust our money to anyone but ourselves Ė and our banks. Despite a very chequered history of mismanagement, corruption, false promises and representations, delusions and...

 
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest / trade in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading.

**
The Views and opinions represented in the provided website links and resources are not controlled by the Referring Broker or the FCM.  Further, the Referring Broker and the FCM are not responsible for their availability, content, or delivery of services.