Tuesday, April 27, 2010

Foreign Currency Fixed Deposits

Dear Mr Tan,

I have just started a Foreign Currency FD blog: . This allows Singaporeans to access information about FCFD at a glance, rather than searching the websites of individual banks. Would you like to add a link from your blog?
The URL is also shown on the right panel of this blog.

Your may find it not worthwhile to invest in foreign currency fixed deposit for the short term. You  have to incur a spread of 1% (or more) to convert from SGD to foreign currency and to convert back to SGD, reducing the yield on the fixed deposit. If you invest for a longer term, it may be all right.


Vincent said...

how about investing long term? > 1 yr. the interest rate for aud$ is very attractive, now is > 3%. 1 yr ago, S$1 can get > aud$1.

Anonymous said...

I have been monitoring performance of SD against other major currencies and found that SD appreciate more than the given interest. You can only make money if SD is the weakest when you make the deposit.

airline crew said...

Invest in Foreign Currencies deposit only with spare cash.
Here is a formula that you can use to determine your loss/gains:

P+I S$/P+I A$= breakeven exchange rate

where P = principal
I = interest


Deposit in S$
Principal - S$ 10,000
Length of deposit - 90 days
Interest rate - 0.5%
Interest earned - S$12.328
Principal + Interest - S$10,012.328

Deposit in A$(exchange rate@1.27
Principal - A$7,874
Length of deposit - 90 days
Interest rate - 3%
Interest earned - A$58.246
Principal + Interest - A$7,932.246

Using the formula P+I/P+I

10,012.328/7,932.246 = 1.262

This is your breakeven exchange rate of A$ to S$ if you intend to sell.

Any rate below this would mean any gain from interest earned is wiped out and you would be better of leaving it for the next 90 days or even more.

My opinion is that the S$ will strengthen. But do not forget that the Forex Markets love to use adjectives such as "jumped" , "plunged" to describe a currency movement of 0.0001. They are all quoted to 4 decimal places. For business, this means a lot, however for lay people, it is insignificant. So dont get too excited when the market and media describe currencies as "leaped" to a 4 year high...

Another way is to got for a holiday to Perth or Melbourne and gamble at the casino or play the TAB races ( horses, dogs, trotting ) have a beer too. Any winnings above A$5000, open an account there with internet facility and just park it there till kingdom come. Same as buying property but minus the legal hassel and issues.

The interest earned could pay for your next hotel stay or meals

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