Essay On The Mexican Peso

Introduction

When it comes to international business transactions, currency exchange is something that needs to be taken into consideration. The topic has been the center of controversy and discussions among governments and economists due to the relationship between currencies and trade, and the impact this relationship has on the economy (Auboin& Ruta, 2012). The main issue is that the exchange rate of currency is volatile, meaning it is constantly changing, which can cause the currency to increase its value or depreciate, which reflects directly on the economy. For countries who maintain a business relationship, fluctuations in currency exchange rates can be critical. For countries such as U.S. and Mexico who maintain a very close relationship, not only because they border, but because of the free trade business relationship they maintain and the strong economic ties that connect the countries (Villareal, 2014). This paper evaluates the Mexican peso, and how a fluctuation in the currency affects the business

Experts have explained that the behavior of the Mexican Peso is very similar to that of the U.S. dollar. During periods when the U.S. dollar has risen or fallen against other major currencies such as the euro, the peso has risen or fallen, against the dollar (Arteta, Kamin, & Vitanza, 2009). According to Villarreal (2014) the United States and Mexico share many common interests related to trade, investment, and regulatory cooperation, which can generate similarities in the many aspects of both countries, including currency. Another significant relationship is the high volume of remittances the flows from the United States to Mexico, which has been recognized to be a booster to the country’s