Updated in 2008 from 2006 edition.

As is usual for “Prices and earnings,” the 2006 edition attracted
great interest and we were often asked when the next comparison
would be published. The wait is over, we are happy to say.
The relative values of currencies have changed significantly since
our last in-depth study, in early 2006. The euro has continued
its extraordinary ascent. As we write, EURUSD had breached the
1.50 frontier. Coming after our data deadline, this new level
is not in the data used to prepare this analysis, but the euro’s
steady ascent versus many currencies, particularly the US dollar,
is very evident in our calculations.
Relative prices are very sensitive to shifts in exchange rates or inflation
rates from country to country. We have used the average
exchange rate over the review period to convert the basket of
currencies into a single reference currency, rather than purchasing
power parity rates. Currency movements have a direct effect
on relative price and wage levels among the various cities that
are important for travelers. For this reason, we have decided to
update our price, wage and purchasing power indexes, but without
gathering new data for each city.