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In our increasingly globalised world, it has become common to deal in multiple foreign currencies for various reasons. These may include regular overseas payments due to business or family ties, hedging against exchange rate fluctuations, or diversifying our portfolio.
This might sometimes lead us to hold foreign currencies in cash, although it may not be ideal since we don’t use them as frequently as our local currency. Moreover, holding cash doesn’t generate any yield, resulting in an opportunity cost in this high interest rate environment.
Fortunately, we now have the option to maximise our foreign currency savings, similar to our Singapore Dollar, using a foreign currency fixed deposit account. This offers a low-risk way to earn a decent yield on our foreign currencies until we need to use them.
What Is A Foreign Currency Fixed Deposit Account?
A foreign currency fixed deposit account is similar to a regular Singapore Dollar fixed deposit account in that you receive a guaranteed interest rate over a predetermined period of time that you deposit with the bank. Instead of using your Singapore Dollar, you buy and hold other popular foreign currencies such as the US Dollar (USD), Australian Dollar (AUD), British Pound (GBP), Euro (EUR), and New Zealand Dollar (NZD).
The interest rate that you can earn on the foreign currency fixed deposit will depend on the foreign currency you’re depositing, the amount that you invest, and how long you intend to hold your fixed deposit. Typically, the more you invest and the longer the fixed deposit duration, the higher the interest rate that you will earn.
Upon maturity of the fixed deposit, you can choose to either (1) convert your foreign currency holdings at the prevailing exchange rate to Singapore dollar, (2) keep the funds in the foreign currency through a Foreign Currency Current Account (for example, RHB allows you to earn up to 2.50% p.a. on selected foreign currencies without any deposit limit), or (3) lock into another foreign currency fixed deposit term.
A Safe Way To Hold And Grow Your Foreign Currencies
When you open a foreign currency fixed deposit, you are essentially buying the foreign currency by locking in the exchange rate and keeping it for future use while earning interest for doing so. This can be great if you invest in foreign markets or need to make a foreign currency payment at a specific time in the future (i.e., to support children that are either studying overseas or intend to in the future).
A foreign currency fixed deposit helps mitigate exchange rate fluctuations until its maturity. You get the assurance of knowing exactly how much you will have in foreign currencies (principal + interest).
For example, RHB offers transparent and competitive interest rates on five major currencies, including 4.80% p.a. on its US Dollar fixed deposits. It offers a choice of two tenures—the 6-month and 12-month—with a surprisingly manageable minimum placement amount requirement of 5,000 units of the base currency.
Source: RHB – Foreign Currency Fixed Deposit Account (Visit website for latest rates)
Aside from the yield, you could also possibly be better off if the Singapore Dollar depreciates against the foreign currency that you are holding. Similarly, the reverse could also happen, and you could possibly lose out if the Singapore Dollar appreciates against the foreign currency you’re holding. Nevertheless, in either scenario, you still get to earn interest on a currency that you are likely to use in the future.
After your fixed deposit matures, you can easily roll the funds over for another fixed deposit term at prevailing interest rates. Alternatively, if you need to use your funds, you can park them in a foreign currency current account and either wait for a more favourable exchange rate to convert them or start using them.
A foreign currency current account works similarly to a regular SGD current account, where you are able to make withdrawals or deposits anytime without any lock-in period. In fact, you could still earn a relatively decent interest return on those savings with a bank like RHB.
Source: RHB – Foreign Currency Current Account (Visit website for latest rates)
While most banks give 0% interest on their foreign currency accounts, the RHB Foreign Currency Current Account offers 1.00% p.a. interest on major currencies such as AUD, EUR, GBP, and NZD and 2.50% p.a. for USD. It also has a relatively lower minimum deposit and balance requirement than the fixed deposit account, giving you more flexibility over the use of the funds while still earning high interest.
Anyone age 18 and above can open a foreign currency fixed deposit account and/or current account with RHB completely fuss-free via their RHB Mobile SG app. However, it is important to keep in mind that Singapore Deposit Insurance Corporation Limited (SDIC) will not provide insurance for foreign currency deposits, dual currency investments, structured deposits, or other investment products.
Maximise Your Foreign Currency Savings With A Fixed Deposit
Whether you need to make regular foreign currency payments or wish to set aside money for your children’s overseas studies, a foreign currency fixed deposit account offered by RHB Singapore, which gives up to 5.00% p.a. interest, can help you grow your savings until you need to use them.
Skip the long queue at a local branch to open an account by downloading the RHB Mobile SG App, available now on the App Store and Google Play Store. It allows you to conveniently open a foreign currency account and a foreign currency fixed deposit account, among others, make new fixed deposit placements on your existing account, or do currency conversion.
Check out the latest deposit interest rates that RHB offers on the foreign currency of your choice by visiting their website and locking in the attractive rates today.
This article was first written on 02 June 2023 and has been updated to reflect the latest rates.