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Should I put money in a foreign currency fixed deposit?

Monday, January 26, 2015

Long, long time ago, I was attracted to the high interest rates of a foreign currency fixed deposit. Upon maturity, the interest received was not even able to cover the exchange rate loss. Ouch.

不好玩

No more such adventures for me. Once bitten, twice shy.

Even now, why do banks give higher interest rates for foreign currency fixed deposits in A$ but a lower interest rate for US$? Why? Why?

Clue:



Unlike a fixed deposit in S$, there is no bao jiak with fixed deposits in a foreign currency. Well, for us living in Singapore anyway.

Note: 
Just the view of a local frog in a local well on an island called Singapore.

Related posts:
1. Why fixed deposits?
2. Special chests for emergencies.

References:
1. Australian dollar drops to 5.5-year low after ECB move.
2. POSB 1.88% FD for 12 months.
 

4 comments:

qook said...

I'm surprised that no one has commented yet, especially given today's announcement from MAS on the surprise change to monetary policy. Whilst I certainly don't advocate foreign currency FD to chase yields of 3-4%, it seems like capital appreciation may be on the cards. Personally I have small long positions in gbp and usd, and was considering adding eur and aud before the surprise move. Not sure if anyone else shares similar thoughts?

AK71 said...

The Australian dollar on Monday morning weakened below parity against the Singapore dollar for the first time since it last closed below that level in March 2009 during the global financial crisis.

One Australian dollar could buy $0.9981 Singapore dollars as at 11.20am on Monday.

The once-mighty Aussie dollar has been battered by slowing global demand for the country's commodities exports and a string of disappointing economic data in recent months.


Source:
http://www.straitstimes.com/business/economy/australian-dollar-falls-below-singapore-dollar-for-the-first-time-since-2009#xtor=CS1-10

AK71 said...

The Australian dollar has been hurt by slowing global demand for the country's commodities in recent months.

On Friday, the Australian dollar dropped to its weakest level in six years against the US dollar as a gauge of Chinese manufacturing activity unexpectedly fell to the lowest level in 15 months. China is the biggest market for Australia's natural resources.

Singapore firms that derive a large part of their income from Australia include Singapore Telecommunications and Frasers Centrepoint.


Source:
http://www.channelnewsasia.com/news/singapore/australian-dollar-falls/2010162.html

AK71 said...

Shared on my FB wall:

"Hi Mr AK,
I don't have much money but saving hard. I was at the bank and I rejected all their offers of unit trusts and ILPs thanks to you. I was there to renew my $10,000 FD. Then, they offered 6 mths NZ$ FD. 2.1% per annum. I feel it is very attractive. Please talk to yourself. Thanks."

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