The "Latte Index", developed by The Wall Street Journal, uses purchasing-power parity (PPP) - comparing the cost of the same good in different countries - to estimate which currencies are overvalued and undervalued.
In this case, the WSJ tracked down the price of a tall Starbucks latte in dozens of cities around the world. These prices are then converted to U.S. dollars and compared to the benchmark price, which is a tall Starbucks latte in New York City (US$3.45).
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