The Economist updated their Big Mac Index, which measures currency misalignments based on purchasing-power parity.  We just used the Big Mac Index this past weekend in our recent posts,  Rio’s $5.00 Big Macs and Geithner’s Naughty List.   Here is what the Economist had to say today,

A WEAK currency, despite its appeal to exporters and politicians, is no free lunch. But it can provide a cheap one. In China, for example, a McDonald’s Big Mac costs just 14.5 yuan on average in Beijing and Shenzhen, the equivalent of $2.18 at market exchange rates…In America, in contrast, the same burger averages $3.71…

The tensions caused by such misalignments prompted Brazil’s finance minister, Guido Mantega, to complain last month that his country was a potential casualty of a “currency war”. Perhaps it was something he ate. In Brazil a Big Mac costs the equivalent of $5.26, implying that the real is now overvalued by 42%. The index also suggests that the euro is overvalued by about 29%. And the Swiss, who avoid most wars, are in the thick of this one. Their franc is the most expensive currency on our list..

On Friday, the Treasury Department is due to state whether they believe China is a currency manipulator.   Treasury is required by law to issue twice-yearly reports on the currency practices of the major U.S. trading partners by Oct. 15 and April 15 each year.

The report is often delayed but U.S.-China Business Council said on Thursday the latest report would be released on Friday.   The expectation is the Administration will give China a pass.  If not, we expect some market pyrotechnics and gold at $1,400 by the close.  Stay tuned!