foreign currency fixed D makes no sense

[wikiwonders]

The buy and sell rate from the banks is so awful that for NZD, you lose more than 2% capital if currency stays unchanged.

Meaning if I make use of the relatively high interest rate of about 2.8 (DBS), hold it for 1 year, and change back to SGD, I lose money..

my only bet is for NZD to appreciate agains SGD so that when I change back, i get capital gains. But who can predict?

In the same sense of risk, capital input, why wouldnt I buy stocks like singtel, when they pull back a little. They give more than 2% dividends, and I lose brokerage fees only.

 

[coffee_boy]

The foreign ccy deposits are more for clients whom already have cashflow in say AUD, NZD, GBP or USD for them to place such ccys into the deposit which are paying a higher intrerest. The bank will spreads applied in the conversion of the ccy via a normal FX exchange would have been wide enough to wipe out a huge gains into the deposit yield.

In the current environment, or at least so for the next one or 2 years, given the countries with high interest rates are mostly looking to stimulate growth via cutting rates, while US is on the offensive with its recovery, I do not think AUD or NZD will appreciate ags the USD, and for that matter, ags the SGD since SGD itself will be weakening too.

Unless you already have the underlying in the account, you could do with using the SGD to buy high yielding equities like you have rightfully mentioned.

Else, if you do hold the underlying high yielding ccys and not looking to convert them back into SGD, you could still place them into the fcy deposits, and alternatively sell a NZD call SGD put option (assuming with an external broker) with the same notional with the same time line to earn a premium to add on to the yield with the strike on the topside, but run the mismatch in the conversion rate btw the strike and what you could really sell the NZD to get SGD at maturity with the bank.

 

[FP_IFA]

The buy and sell rate from the banks is so awful that for NZD, you lose more than 2% capital if currency stays unchanged.

Meaning if I make use of the relatively high interest rate of about 2.8 (DBS), hold it for 1 year, and change back to SGD, I lose money..

my only bet is for NZD to appreciate agains SGD so that when I change back, i get capital gains. But who can predict?

In the same sense of risk, capital input, why wouldnt I buy stocks like singtel, when they pull back a little. They give more than 2% dividends, and I lose brokerage fees only.

And if the person is stupid enough he would go for the 3 months tenor without realizing that the annual interest of 3% is actually less than 1% in that 3 month period.