The pataca (MOP) has been the legal tender in Macao for over a century. In 1905, the Macao Government granted the Banco Nacional Ultramarino (BNU) the exclusive right to issue banknotes in pataca denominations. The first batch of pataca banknotes was circulated in Macao on January 27, 1906. The name "pataca" was derived from the then popular silver coin in Asia, the Mexican eight Reales, known in Portuguese as the Pataca Mexicana.
 

In 1980, the Government transferred the exclusive right to issue patacas from the BNU to the IEM. The BNU has continued to issue pataca banknote though its status has been altered to the agent bank of the IEM. When the Government renewed its note issuance agreement with the BNU on October 16, 1995, the Bank of China (Macao Branch) became the second note-issuing bank. With the establishment of the AMCM, the authority to issue patacas was transferred to the Portuguese-administered Government and has continued to be vested with the Government of Macao Special Administrative Region after December 20, 1999.
 

The pataca issue is 100-percent backed by foreign exchange reserves under the currency board system. The note-issuing banks are required to pay the AMCM - the currency board - an equivalent amount of Hong Kong dollars at a fixed rate of HKD1:MOP1.03 for non-interest bearing Certificate of Indebtedness as legal backing for the banknote issues. With a 100 percent reserve backing, the AMCM assures the full convertibility of the Macao pataca into its reserve money, i.e. the Hong Kong dollar. A linked exchange rate relationship with the Hong Kong dollar is correspondingly established under the currency board system. As the Hong Kong dollar is linked to the United States dollar (USD) under parallel arrangements, the pataca is indirectly pegged to the United States dollar at an exchange rate of about USD1:MOP8.