Mexican Peso (MXN)

The national currency of Mexico

What is the Mexican Peso (MXN)?

The Mexican Peso is the national currency of Mexico and is abbreviated as MXN. It originated from the Spanish dollar between the 15th and 19th centuries. While in the Americas, MXN is the third most exchanged currency after the US dollar and the Canadian dollar, it is the main currency that is exchanged in Latin America.

 

Mexican Peso (MXN)

 

Mexican peso and USD pairs draw fewer participants than the main pairs, including yen (USD/JPY) and euro (EUR/USD). However, MXN still offers extremely liquid access to growth opportunities in emerging markets and Latin America. In recent decades, the Mexican peso’s evolved from a single national currency into a potent global financial instrument.

 

Summary

  • The Mexican Peso is the national currency of Mexico and is abbreviated as MXN.
  • MXN still offers extremely liquid access to growth opportunities in emerging markets and Latin America.
  • Extremely prosperous US-Mexico border areas involved in trade interactions contribute substantially to the MXN’s liquidity.

 

History of the Mexican Peso

Similar to the name penny given to a 1¢ coin and dime to 10¢, the name peso was given to the eight coins that Spain issued in Latin America. The coins were actually the Spanish dollars or eight pieces that were in large circulation in Asia and the Americas until the beginning of the 19th century when the Coinage Act came into force in 1857.

The history of paper money in Mexico dates back to the turn of the 20th century. When the Bank of Mexico was established in 1925, it was given the exclusive right to grant money by printing notes and minting metal coins. It also controlled currency circulation, exchange rates, and interest rates.

The Mexican central bank was founded when it was required to reactivate credit and incorporate the use of banknotes into people’s everyday lives. For this purpose, besides fulfilling the responsibility as an issuing bank, the financial agency was empowered to act as a regular credit institution. Finally, between 1929 and 1930, the banknote was established as the country’s key payment instrument.

The New York-based American Bank Note Company (ABNC) printed the first MXN notes that were issued by the Bank of Mexico. ABNC’s workers printed the notes in compliance with the customers’ specifications. In other words, in the case of Mexican banknotes, the Bank of Mexico identified the elements and individuals it desired to represent in each denomination. On the other hand, ABNC produced the engravings or the Bank of Mexico directly chose the engravings among the company’s records.

 

The Current Mexico Peso

The buying power of MXN declined towards the end of the 20th century due to an inflationary process. Hence, the Bank of Mexico minted coins in high denominations that they crossed the fifty-peso denomination. The federal agency also produced denominations of one thousand Mexican peso coins and five thousand Mexican peso coins.

In 1992, a new monetary unit was adopted for the United Mexican States in order to improve the management of such a large volume of national currency. The new monetary unit was named “Nuevo Peso” and is equivalent to 1,000 former pesos.

The most recent banknote family, known as Type F or Series F, included improvements in security features, colors, and note sizes compared to the previous series. As far as their materials are concerned, the 20-peso and 50-peso notes are printed in polymer, while the others are printed on cotton paper.

In 2013, the Bank of Mexico released a new 50-peso note featuring new security components, crafted with the most modern technologies, along with other variants on the same denomination Type F banknote.

Paper money currently used is in the denominations 20 peso, 50 peso, 100 peso, 200 peso, and 500 peso. Coins in denominations of 20 and 50 centavos (100 centavos makes up 1 peso), and 1 peso, 2 peso, 5 peso, 10 peso, and 20 peso are also in circulation.

 

Factors Affecting the Mexican Peso

Mexico shares a border with the United States, and its relationship with the US makes way for trade arrangements, as well as immigration disputes. Extremely stable border areas involved in trade interactions contribute substantially to the peso’s liquidity.

Thie Mexican peso also swings with the energy rates because Mexico’s large oil reserves offer leverage for funding. The borrowed money helps the Mexican government to collect funds for domestic projects. Foreign lenders are more likely to spend and assume risk in oil-dominated countries during high crude oil prices. The links between the Mexican peso and oil often allow it an ideal way to predict oil prices.

 

More Resources

CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

  • Canadian Dollar (CAD)
  • Currency Pair
  • Colombian Peso
  • North American Free Trade Agreement (NAFTA)

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