In a previous blog (link), we noted the remarkable strengthening of the U.S. dollar over the past 14 years, as shown in the chart below. This long dollar bull cycle has brought the U.S. currency to its highest level of valuation relative to the currencies of trading partners since President Nixon severed the dollar’s link to gold in 1971.
Another interesting measure of relative currency values is The Big Mac Index from The Economist magazine. The BMI compares the dollar price of a Big Mac sandwich in approximately 50 countries worldwide relative to its price in the United States. It serves as an alternative measure of the relative cost of living, incorporating inputs from the agricultural, manufacturing, and service sectors, including taxes and regulations.
The chart below illustrates the change in the price of a Big Mac from 2000 to 2025. In the United States, the price of a Big Mac rose by 130% during this period—significantly more than the 90% increase in the U.S. Consumer Price Index (CPI). The chart highlights striking variations in Big Mac price changes, ranging from a 300% increase in Poland to nearly no increase in Japan and Taiwan.
In accordance with the Real Effective Exchange Rate (REER), The Big Mac Index indicates a strong relative appreciation of the U.S. dollar since 2010. The rankings of the index for the past 25 years for a selection of emerging markets (EM) and developed countries are shown in the table below. The table is color-coded: developed countries in black, EM commodity producers in red, and the remaining EM countries in green. This period spans an extraordinarily turbulent economic environment, including the China “Shock,” the commodity super-cycle, the Great Financial Crisis, the COVID-19 shock, and the beginning of deglobalization. The last 15 years can be characterized as a period of “American Exceptionalism,” driven by the shale revolution and the global dominance of Silicon Valley’s tech titans.
The table highlights several trends over this period, best observed through the color-coded categories:
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Developed Countries: These economies have maintained a relatively narrow range of currency values relative to each other. Although the U.S. dollar is currently at a high level, it has typically remained in the top third of the table. The Scandinavian countries, Britain, and Switzerland have stayed within a stable range near the top. Even Canada and Australia—both major commodity producers—have remained within a relatively tight range, as have Hong Kong and Singapore, two service-driven economies at the core of global trade. A notable exception in the developed world is Japan, which has experienced an extraordinary devaluation of the yen due to chronic deflation, quantitative easing, and external economic shocks. However, recent yen strength and pressure from the Trump administration may indicate that this trend is beginning to reverse.
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Emerging Markets (Excluding Commodity-Dependent Countries): These countries can be divided into two groups:
- Mercantilist Economies: Taiwan, South Korea, China, Thailand, Malaysia, and Vietnam have prioritized export competitiveness, leading to remarkable stability in the index, positioning them consistently in the bottom third. These nations have been among the biggest beneficiaries of hyper-globalization but now stand to lose from deglobalization. The cases of South Korea and Taiwan are particularly striking—despite their increasing wealth, their currencies have become more competitive in terms of the BMI. Given their strategic alliances with the U.S., strong pressure from the Trump administration regarding tariffs and currency realignment is expected. All these countries find themselves caught between the U.S. and China, facing the dual challenge of Chinese export competition and the threat of U.S. tariffs.
- Domestic Market-Oriented Economies: Countries such as Turkey, Poland, India, and the Philippines show little commitment to currency stability, experiencing broad exchange rate fluctuations that undermine their export competitiveness.
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Commodity-Dependent Emerging Markets: These nations experience high levels of currency and economic instability. Over the past 25 years, free capital flows have exacerbated commodity-driven currency cycles, leading to extreme volatility due to “hot money” inflows and capital flight. This instability has contributed to acute deindustrialization in many of these economies. Argentina’s recent experience is particularly revealing—since 2020, the cost of a Big Mac in Argentina has surged by 143%, making it the second most expensive in the world. In contrast, in 2010, Argentina had the second cheapest Big Mac, surpassed only by China. Similarly, Brazil had one of the world’s most expensive Big Macs in both 2010 and 2015, exceeding even traditionally costly countries such as Sweden and Denmark. Among commodity-linked currencies, Indonesia stands out as an exception, behaving more like an “Asian Tiger” currency with relatively low volatility.
In the current landscape of trade wars, shifting economic alliances, and increasing geopolitical tensions, currency realignment is becoming an essential tool for policymakers. The trends highlighted by The Big Mac Index and the Real Effective Exchange Rate (REER) reflect deeper structural shifts in the global economy—from the rise of American exceptionalism to the challenges faced by both developed and emerging markets. As the forces of deglobalization take hold, nations will likely respond with a mix of tariffs, industrial policies, and monetary interventions to maintain competitiveness. The coming years will test the resilience of global currencies, determining which economies can adapt to this new era of economic realignment and which may struggle to keep pace.