Tuesday, 28 September 2010

How to tell if your currency is undervalued

How to tell if your currency is undervalued?
If you have had an export surplus for the last 5 years, your currency is undervalued.

How to tell if your currency is overvalued?
If you have had an import surplus for the last 5 years, your currency is overvalued.

Simples.

Why do I mention this?
Brazil is whining its currency is overvalued, despite having an export surplus of $28bn (From Wolfram Alpha).
I've forgotten how to get Wolfram and Hart Alpha to tell me the historic numbers, but I figure it was a surplus every year.

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