This index measures the value of a currency by using the price of a cup of coffee

On the World Economic Forum, there is a figure showed the price of lattes around the world with a benchmark of NYC lattes price. The Latte Index is mostly for fun, but it’s also broadly in line with predictions made by the experts.

For example, the price of a latte in Toronto, Canada works out to US$2.94, which is about 14.8% under the benchmark NYC price. This suggests that relative to the USD, the Canadian dollar is undervalued. Interestingly, estimates from the aforementioned sources (BIS, OECD, CFR, IMF) have the Canadian dollar at being up to 10% undervalued – which puts the Latte Index not too far off.

Given the wild range of estimates that exist for currency values, using the relative cost of a cup of joe might be as good of a proxy as any.

In conclusion, in city like Cairo, Mexico city, London, Toronto, Sydney, Tokyo and Berlin, you use less money to get lattes. The purchasing power of these city's fiat currencies are greater comparing to the rest of the country's currencies.

I personally think it's pretty fair that in Shanghai, CNY is overvalued a lot.