Yen will strengthen tomorrow. according to inflation model, 112.32 is expected in USDJPY but current price is 113.78 so us dollar is substantially overvalued
According to Big Mac index model (based on PPP), Australian dollar is currently undervalued by 15%. But I think that percentage is a bit too large though AU $4.28 US $5.06 Implied price for AUDUSD = 0.84
Implied USDJPY by Big mac index JPY 380 Yen USD $5.06 Spot price for Yen = 113.600 JPY in USD = $3.34 Implied USDJPY = 74.98 Yen is substantially undervalued by Big Mac index - but it's probably because they have been in recession
The Big Mac index?i'm not worthy. just a lowly retail loosing trader. i do the best i can with limited information.
It's just a coincidence. To predict future as well as to work out current spot rate, there are 3 models - interest rate, inflation and PPP (Big Mac index) You're one of best performing FX traders on ET so don't worry, we will all make money together.
Consumer price index: Rates on hold as inflation bottoms The Reserve Bank has been given licence to leave interest rates on hold at its first board meeting for the year, after the delivery of a low inflation result in line with its expectations and signs it will lift. Australia's inflation rate was just 0.5 per cent in the December quarter, down from 0.7 per cent in the September quarter. But the more closely watched measure of "non-tradables" inflation climbed from 0.5 per cent to 0.8 per cent. "It suggests inflation has steadied and may have passed the trough," said HSBC chief economist Paul Bloxham. "We expect underlying inflation to gradually climb from here as the recent rise in commodity prices boosts incomes and flows through to support for domestic wages and inflation. "We expect the Reserve Bank to be on hold in coming quarters and expect rate hikes in 2018." "The Reserve Bank doesn't need to cut rates again with inflation trending higher, and there are doubts that rate cuts would actually do much in terms of driving the economy and lifting inflation. And rate hikes are off the agenda." http://www.smh.com.au/business/the-...old-as-inflation-bottoms-20170125-gtylz0.html p.s. What this news article implies is that RBA will leave AUDUSD to appreciate.