Mexican Peso

The Mexican peso is the official currency of Mexico and the most traded currency in Latin America. The peso is one of the oldest currency names in the Americas, descended from the Spanish silver dollar, and Mexico removed three zeros in an early-1990s revaluation to simplify prices.

Unusually for an emerging market, the peso trades freely and deeply enough to be used around the clock by global investors. That liquidity makes it a favorite for currency strategies and a frequent stand-in for broader emerging-market risk.

The Bank of Mexico, the country's independent central bank, issues the peso and sets interest rates, targeting 3 percent inflation. It lets the peso float freely, intervening only rarely and in stressed conditions.

That free float was forged in crisis. In December 1994, a botched devaluation set off the Tequila crisis, and Mexico let the peso float; the painful episode pushed the country toward central bank independence and the open, market-set currency it has today.

Mexico's economy is tightly woven into the United States through trade, manufacturing, and migration, so the peso is a sensitive gauge of North American trade and US economic health. News about tariffs or trade deals can move it sharply.

Because the peso is liquid and has often paired high interest rates with relative stability, it has been a popular target for the carry trade, in which investors borrow a low-yielding currency to hold a higher-yielding one. That status brings inflows in calm times and outflows when fear rises.

Mexico lived through severe inflation in the 1980s and early 1990s before central bank independence and inflation targeting brought it under control. Inflation is far lower now, though still typically above US levels.

For Mexican savers, the long memory of high inflation shapes behavior, and the gap between interest rates and inflation remains central. A peso that holds value better than in the past has helped rebuild trust in the currency.

The peso is quoted as the number of pesos per US dollar. Over the past decade it has mostly traded in a rough range between the high teens and the low 20s pesos per dollar, with sharp swings around US elections and global risk events.

The peso's deep, free-floating market lets it move quickly in both directions, which is part of why traders use it to express views on emerging markets. The peso is on one side of roughly 1.5 percent of global foreign exchange trades and is not separately reported in central bank reserves.