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A low-risk fixed deposit account can be the right investment to improve your financial situation or earn more money to save. It’s opened for a predetermined period to earn interest on the money deposited at maturity.

Among the newest investment products in great demand, foreign currency fixed deposits are popular owing to the hard local currency, the Singapore dollar. Following this, the leading banks in Singapore are luring depositors with tempting interest rates on a fixed deposit Singapore dollars and international currencies, such as the US dollar (USD), British pound sterling (GBP), Euro currency (EUR), Australian dollar (AUD), and Hong Kong dollar (HKD).

Foreign Currency Fixed Deposit – What Is It?

Foreign currency fixed deposit accounts or FCFD accounts are fixed investment products that operate like SGD dollar fixed deposits. They guarantee interest on money deposited with a bank for a specific period. The only difference is that you would have to buy and keep your money in one or more of the major foreign currencies the bank offers rather than the Singapore dollar.

The banks in Singapore offer an interest rate on fixed deposits in foreign currencies based on the borrowing rate of the nations concerned. For instance, banks in Singapore have been offering better interest rates on US dollar fixed deposits since 2022. The US Federal Reserve’s decision to increase its Fed Fund rates up to 0.25 percent in 2022 and 5.25 percent in 2023 is related to this.

Generally speaking, the higher the interest rate, the larger the money invested and the longer the fixed deposit’s tenure. For instance, DBS/POSB offers an attractive interest of 4.97 percent on fixed deposits in foreign currencies.

However, you can make a fixed deposit placement with an initial deposit of a minimum of 5,000 or 10,000 units of the quote currency equivalent from one day or month onwards with most banks in Singapore.

Some Benefits of Having a Fixed Deposit in Foreign Currencies

Investors find fixed deposit investments appealing for various reasons.

  • Offers diverse portfolio: FCFDs in different currencies are an option for investors who want to diversify their portfolios.
  • Allows you to hedge: You can use the deposit account as a hedging instrument for businesses wanting to protect themselves against fluctuations in foreign exchange rates. An FCFD is used by such businesses to enable cross-currency swaps.
  • Helps in dealing in a certain currency: FCFDs are a good option for investors who want to trade and hold a specific currency, for they run a business there, have kids studying there, or have assets abroad.
  • Offers Automatic renewal: When your deposit matures, it will be renewed automatically for a new term at the current interest rate. ​

For instance, you can deposit foreign currency and Singapore dollars in one Fixed Deposit account with DBS.

Some Points to Consider When Investing in Fixed Deposits – Foreign Currency

It is better to use the money you won’t need immediately to open a fixed deposit Singapore account in foreign currency because they would be locked up for a certain period. You could be charged a penalty fee and lose out on interest if you have to make an early withdrawal before the loan’s maturity.

Moreover, it would be best if you considered the exchange rate risks while returning the foreign money to your home currency at maturity. On the contrary, if the foreign currency appreciates relative to your target currency during conversion, you will gain profit from the investment.

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