Papirex
Apr 2, 2006, 8:38 AM
Post #3 of 4
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It is important to know that The Mexican Peso now is a floating currency. It’s value or devaluation is not set by any government agency, rather it floats to whatever level the market dictates. The published exchange rates are simply yesterdays closing rate, it is not a rate set by anyone, or any government agency.
The value of the Peso fluctuates every hour of the business day. There are three prices for the Peso in any given hour, the ask, bid, and sell price, which determines The Peso’s value for that hour. Think of it as you would any other commodity, or product.
Most international transactions are supposedly using the closing rate of the previous business day. ATM machines here seem to be using the current days hourly rate. Using the FX currency converter, if you enter an amount to be converted in the morning, and then the same amount in the afternoon, you will usually get two different amounts; this reflects the hourly fluctuation of the Peso.
I do recommend using the FX currency converter:
http://www.oanda.com/convert/classic?margin_fixed=0&expr=USD&lang=en&pref_list=USD_MXN&menu_rows=7&date_fmt=us&exch=MXP_USD
I have customized it to show just the US Dollar and The Mexican Peso, but you can go to the home page for many other currencies. There is a lot of good information on that site concerning international currency conversions. You can also pick a date in the past to see what the closing rate was then.
I do remember some devaluations in the past, in 1976 the Peso dropped from 17 ½ to The US Dollar to approximately 35 to The Dollar by 1982. Then what I believe was the most serious devaluation began, triggered by the nationalization of all the banks in Mexico. In the next decade, the Peso dropped from 35 to The Dollar to a low of 3,121 to the dollar by January 3, 1993. Coins had become absolutely worthless. The New Peso took effect on January 4, 1993. The banks had been privatized again by then. You can verify those figures by going to those dates, using the FX converter.
Each New peso was worth 1,000 of the old Pesos. The old Pesos were still valid for some time; I think it may have been for a year, I’m not sure about that. At that time if you wrote a check, you had to use this format: N$ xx.xx. The capital N indicated that the check was for New Pesos, and not for the old Pesos. You will occasionally still find a coin with a capital N on the face of it, indicating that it is a New Peso coin.
I hadn’t been to Mexico in a few years when my wife and I were married in the mid-1980s. When we came to Mexico City so I could meet her family, the first thing I had to buy was a pocket calculator. We would be in a store, and my wife would say something like “Oh, look at those shoes, they are only $178,500 Pesos, how much is that in Dollars?” I found myself being a Peso millionaire on that trip.
Most people believe the most serious devaluation to be the one that occurred in 1994. I don’t think it was the most serious, but it was the most dramatic, because the Peso lost half its value overnight.
The greatest threat to having another serious Peso devaluation here will be the political climate in Mexico. If another socialist, or a leftist wins the next election, you will be very thankful if you kept your money and major assets nob.
Rex
"The supreme happiness of life is the conviction that we are loved" - Victor Hugo
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