Tuesday, February 05, 2008

Dual currency investment (or deposit)

Dear Mr. Tan,

Recently, I wanted to invest in Australian deposit (to enjoy a higher interest rate). The relationship manager recommended a Dual Currency deposit to me. It gives me a higher interest rate, but on maturity I am given my money back in Singapore dollars or Australian dollars, depending on the exchange rate at that time. Is this a good investment?

REPLY

I advise against this type of structured product. Although you get a slightly higher interest rate, you are exposed to the risk of a loss (in case the Australian currency depreciates). You do not get the benefit of any gain in this currency.

This is explained in more detail in this FAQ:
http://www.tankinlian.com/faq/duali.html

It is better to invest in a straight forward foreign currency deposit:
http://www.tankinlian.com/faq/foreign.html

1 comment:

Anonymous said...

I am doing the same with Citi but I am trading on USD and GOLD. I have got converted back and forth a few times, but have not made a loss overall.
I am doing one week trades and earning between 10-15% (annualized) interest per week

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