Foreign Currency Fixed Deposits – A Whole New Ball Game
The risk of foreign currency fixed deposit is the risk that the foreign currency you invest in loses its value (or depreciates) against Singapore Dollar. That can potentially wipe out the higher interest you earn from putting your money there. Therein lies the potential risk, and therein also lies the potential returns as well.
I was fortunate in investing in my first foreign currency fixed deposit (FCFD) just after the sharp correction in New Zealand Dollar (NZD) and managed to lock in at NZD/SGD 1.07 at a rate of 8.4%. I was lucky in that now NZD has risen against SGD to about NZD/SGD 1.12 or +4.67%. This could have easily been reverse (i.e. -4.67%) if the US Federal Reserve had not cut the Feds fund rate thereby contributing to investors seeking better returns from higher yielding currencies such as NZD or Australian dollar (AUD). Read more…