Suppose that a currency's value is found to be overvalued by using purchasing power parity. Then

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Purchasing power parity (PPP) suggests that in the long run, exchange rates should adjust to equalize the price of identical goods and services in different countries. If a currency is overvalued according to PPP, it implies that goods and services in that country are more expensive compared to another country when converted at the current exchange rate. This situation is typically unsustainable, leading to an expectation that the currency will depreciate to restore parity. However, PPP does not provide specific timing or the magnitude of the adjustment, hence the uncertainty about "when" and "how much."

Suppose That a Currency's Value Is Found to Be Overvalued