In the quest for higher “risk-free returns”, many Singapore-based investors are increasingly turning towards the alluring prospect of USD fixed deposits and money market funds due to the higher USD
interest rates.
Banks and investment platforms have also marketed the attractive 5+% yields of USD deposits.
In this article, we will look at the fundamentals of these USD products, the risks, the hidden costs Singapore-based investors take on, and how they should holistically think about foreign currency exposure for their different financial goals.
Why do many investors favour USD fixed deposits?
Higher yield relative to other major currencies
|
6-month yield |
1-year yield |
| SGD |
4.00% |
3.88% |
| USD |
5.44% |
5.25% |
| EUR |
3.89% |
3.62% |
| JPY |
-0.067% |
0.00% |
| GBP |
5.36% |
5.20% |
Source: Bloomberg, yields as of 4 January 2024
Fixed deposits and money market funds track the yields of the respective country’s treasury bills and government bonds very closely. The data above shows that USD offers the most attractive yield at the short end of the yield curve....
