The Australian dollar is the world’s most overvalued, according to research by HSBC.
The bank made its conclusion after comparing data from the OECD, The Economist’s Big Mac Index and the Current Real Effective Exchange Rate.
The impact of the Australian dollar’s persistent strength has been felt by the manufacturing industry.
The REER – “The weighted average of a country's currency relative to an index or basket of other major currencies adjusted for the effects of inflation” – suggests the dollar is overvalued by 12 per cent. The Economist’s Index draws a similar conclusion, stating that the dollar is 12.2 per cent overvalued.
Australia's lack of intervention in the “currency war” means the dollar ''will likely see further upside should it worsen'', stated HSBC’s report, cited in Fairfax Media.