Originally, the peso was the Spanish dollar, one of the strongest currencies in the world:
The Spanish dollar or peso (literally, ‘heavy’) is a silver coin which was minted in Spain after a Spanish currency reform in 1497.Thanks to the vast silver deposits that were found in Mexico (for example, at Taxco and Zacatecas), and to silver looted from Spain’s possessions throughout the Americas, mints in Mexico and Peru also began to strike the coin. Millions of pesos were minted over the course of several centuries. They were among the most widely circulating coins of the colonial period in the Americas, and were still in use in North America and in South-East Asia in the 19th century. They had a value of one dollar when circulating in the United States. During the US Civil War the US Government first issued paper money backed by Spanish dollars.
The coin is roughly equivalent to the silver thaler issued in Bohemia and elsewhere since 1517. The German name ‘thaler’ was adopted in English as ‘dollar’, referring to all such coins.
The peso nominally weighed 550.209 Spanish grains, which is 423.900 troy grains or 27.468 metric grams, .93055 fine: so contained 25.560 grams fine silver. Its weight and purity varied significantly between mints and over the centuries.
The peso had a nominal value of 8 reales (‘royals’). The coins were often physically cut into eight ‘bits’, or sometimes four quarters, to make smaller change. This is the origin of the colloquial name ‘pieces of eight’ for the coin, and of ‘quarter’ and ‘two bits’ for twenty five cents.
Spanish silver (unlike paper Mexican pesos) kept its value:
The Spanish eight reales coin was set at a weight of 423.9 grains (27.47 grams) of .9305 fine silver. From that date the coin only depreciated some 4.4% over the next 250 years!
Fascinating:
Spanish dollars were made legal tender in the United States by an Act of February 9, 1793, and were not demonetized until February 21, 1857. Testaments to the importance of these coins continue in that “two bits,” “pieces of eight” and “picayune” have become part of the American vocabulary. Also, it is interesting to observe that when the New York Stock Exchange opened in 1792 rates were reported in terms of New York shillings which were valued at eight to the Spanish milled dollar, hence changes were reported in eighths. Amazingly, over two hundred years after adoption of the decimal system, stock and security price variations [were] still reported in eighths!