Investing in foreign currency fixed deposits

Fixed deposits, or time deposits, are popular in Singapore, and most banks offer you a scope to invest in a number of foreign currencies. Time deposits are relatively secure investment vehicles with a relatively long time horizon.

Besides, foreign currency deposits have the potential to earn you good returns. The highest interest rates that you can expect of Singapore Dollar time deposits would be around 1.25%. Some of them require savings to be locked up for several years. However, with foreign currency deposits, you can expect rates of interest as high as 3% or more.

Investing in a foreign currency deposit comes with its own set of risks. Ideally, you would want to bring all the factors into consideration to weigh the risks involved. This would in turn help you in estimating the gains you could make. Besides, you can actually decide on the currency that would benefit you the most from.

What Are the Ways to Invest in Foreign Currency Fixed Deposit?

It’s possible to invest in foreign currency deposit in two ways:

  1. You can open a local fixed deposit account that provides the option to invest in foreign currencies.
  2. You could open the time deposit account in the foreign country itself. However, opening an account in a foreign country may need you to be present in the country where you want to open the account. That could mean that you could lose out on net savings.

What Should You Consider Before Investing in a Foreign Currency Fixed Deposit?

Some of the most important things you need to consider before investing in a foreign currency deposit are:

  • Usually, with a lower risk, you would get a proportionately lower return.
  • Time deposits usually are of a low risk, and thus the earnings aren’t too high.
  • Some currencies have relatively high rates of interest and can get you a relatively better return.
  • With a longer tenure, you can earn a higher rate of interest and thus a higher net return.
  • Once you invest in any foreign currency deposit, ideally you shouldn’t use the money until maturity. That means the deposit will get locked.
  • In case you have to withdraw the money prematurely, you would have to pay a penalty. Hence, assess your financial condition carefully before making an investment.

Advantages of a Foreign Currency Fixed Deposit

There are several benefits of investing in a foreign currency fixed deposit. Here’s a list:

  • Long-term capital appreciation, good interest returns, and a safety net for your money are the primary reasons you should invest in a foreign currency fixed deposit.
  • By investing in foreign currency deposits, you may be able to diversify your portfolio.
  • Investing in foreign currency deposits is usually considered safe as the influence of market volatility is very limited in fixed deposit accounts.
  • These deposits promise you higher rates of interest than a savings account, so you can earn more at the end of the tenure. You can also ask for periodic returns if you need a steady source of income.
  • The savings can be deposited to another account, if needed, to boost your retirement savings. You can do so by using the earnings from your investment, without touching the initial principal.

Why Must You Save in a Foreign Currency Fixed Deposit?

Consider the following cases to see how foreign currency deposits could be useful:

  • If you are a foreigner on deputation to Singapore or someone who has chosen to work in Singapore for a few years, you might want to deposit some amount in your home country’s currency, while staying in Singapore. This can help you save some amount for emergencies or for capital appreciation. You can time the fixed deposit tenure as per the length of your stay in Singapore.
  • Deposits in foreign currencies could help you take care of you or your family’s future expenses. You could be sending your child abroad for higher studies in the future. If you had already invested in a foreign currency time deposit for this country earlier, the earnings could help you take care of your child’s financial and educational requirements when s/he is in that country.
  • You could be moving overseas with your family. Having a foreign currency deposit in this case may prove to be useful.

A few banks won’t charge you any sort of transaction fees for converting the money back into Singapore Dollars, in case the foreign exchange works against you. However, an exchange rate fee on your deposit may still be levied by a bank. Hence, risks involved are much lower.

Why Should You Take Interest Rates into Consideration?

  • Time deposits help you earn interest on the deposited amount over a fixed term. Generally, you don’t withdraw from time deposits until they mature.
  • The interest amount on foreign currency time deposits are usually higher than those on other traditional savings accounts. This depends specifically on the currency you’re investing in. There could be some currencies, however, that won’t earn you any interest. These deposits are mainly used for diversification.
  • The market in Singapore is highly influenced by the global market, and thus you must be equally aware of the trends in the international market. Study the market carefully before investing in a currency. Depending on the stability of the currency, tenure, and amount, you return could be low or high.
  • Don’t forget to take the exchange rate your bank uses against the currency of your choice when calculating the potential return on your investment.

What Should You Ideally Be Looking for While Investing in a Foreign Currency Deposit?

There are a few things you should ensure checking while investing in a foreign currency fixed deposit:

  • Your investment guarantees long-term capital appreciation.
  • Your investment gets you a higher rate of return than most other safe investment options.
  • Your investment diversifies the investment risks.
  • Your investment offers complete security and protection.

Why Should You Invest in a Foreign Currency Deposit in Singapore?

  • While most of the leading banks and lenders in Singapore offer foreign currency term deposits, the variations between each is too great.
  • Some of the currencies have comparatively high rates of interest while others such as Euro, Swiss Franc, and Japanese Yen barely offer any interest rate.
  • Don’t forget to go through the terms and conditions on the bank’s website before you make an investment in a foreign currency deposit. Don’t forget to study the currency markets and rates, too.

The tables below give you a peak into the foreign currency deposit options offered by top banks in Singapore, and the minimum and maximum rates of interest offered by each of them on different foreign currency deposits:

Note: These rates may fluctuate depending on the amount, tenure, and currency fluctuations.

Bank of China Foreign Currency Fixed Deposits:

Currency Minimum interest (p.a.) Maximum interest (p.a.)
USD 1.5625% 2.25%
AUD 0.9375% 1.625%
CAD 0.6875% 1.25%
RMB 1.85% 2.3%
EUR 0.0001% 0.01%
GBP 0.125% 0.5%
HKD 0.4375% 0.875%
JPY 0.0001% 0.0001%
NZD 1.4375% 1.875%

CIMB Bank Foreign Currency Fixed Deposits:

Currency Minimum interest (p.a.) Maximum interest (p.a.)
USD 1.4375% 2.775%
Sterling pound 0.0175% 1.175%
AUD 0% 0%
NZD 0% 0%
EUR 0% 0%
Canadian Dollar 0.915% 2.05%

DBS/POSB Foreign Currency Fixed Deposits:

Currency Minimum interest (p.a.) Maximum interest (p.a.)
USD 0% 2.075%
GBP 0% 0.685%
AUD 0% 1.485%
CAD 0% 1.65%
NZD 0% 1.875%
CHF 0% 0%
JPY 0% 0%
CNH 0% 1.42%
HKD 0% 1.37%
EUR 0% 0%

HSBC Bank Foreign Currency Fixed Deposits:

Currency Minimum interest (p.a.) Maximum interest (p.a.)
USD 0.24% 2.34%
GBP 0% 0.61%
JPY 0% 0%
CAD 0% 1.82%
CHF 0% 0%
NZD 0% 1.69%
AUD 0% 1.59%
HKD 0% 1.64%
EUR 0% 0%
CNY 0% 1.54%

OCBC Bank Foreign Currency Fixed Deposits:

Currency Minimum interest (p.a.) Maximum interest (p.a.)
USD 1.11% 2.01%
AUD 0.32% 1.45%
CAD 0.49% 1.22%
CNH 0.74% 1.14%
HKD 0.07% 0.84%
NZD 0.21% 1.38%
GBP 0.03% 0.37%

Standard Chartered Bank Foreign Currency Fixed Deposits:

Currency Minimum interest (p.a.) Maximum interest (p.a.)
USD 0.743% 2.258%
GBP 0.05% 0.619%
AUD 0% 1.991%
NZD 0% 2.169%
EUR 0% 0%
CAD 0.597% 1.654%
HKD 0.18% 1.725%
CNH 0% 3.6%

Disadvantages of investing in a foreign currency fixed deposit

Some of the disadvantages of investing in foreign currency time deposits are:

  • Investing in a foreign currency time deposit involves meticulous planning and frequent tracking.
  • The interest rate on a foreign currency time deposit depends on the currency. While some currencies earn you high rates, others don’t yield any returns at all. Besides, the rates keep fluctuating.
  • A foreign currency deposit offers almost zero return until it matures. Be prepared to pay a penalty if you plan to utilise a part or whole of it before the tenure ends. This isn’t your ideal option if you’re looking to invest actively.

So before you really go ahead, weigh all the pros and cons associated with investing in a foreign currency deposit. Introspect your future goals and expectations and act accordingly.

Check and decide whether the currency you invest in is going to be beneficial for you in the long run or not. Consult bank representatives or visit a bank’s website to stay apprised of the latest rates and other important updates.

Investing in foreign currency deposit diversifies your investment and builds a safety net around your investment portfolio. Hence, it makes for a safe bet.

Fixed Deposits from Top Banks
Foreign Currency Fixed Deposits from Top Banks
Currency Specific Fixed Deposit
US Dollar Foreign Currency Fixed Deposit by Bank
Australian Dollar Foreign Currency Fixed Deposit by Bank
GBP Foreign Currency Fixed Deposit by Bank
NZD Foreign Currency Fixed Deposit by Bank
Euro Foreign Currency Fixed Deposit by Bank
Canadian Dollar Foreign Currency Fixed Deposit by Bank
Fixed Deposit Promotion by Banks
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