8.0% Interest from Foreign Currency Accounts

Do you know that you can earn interest rate as high as 8.0% by placing your money in foreign currency saving accounts by some of our banks? The saving works the same way as normal Fixed Deposit that you can make fixed deposit placement for tenures of 1-month, 3-month, 6-month and 12-month. The money will be used to invest in saving accounts in different foreign country that offer high interest rate. So far, New Zealand offers the highest rate of 8++% per annum.

Up to now, I only come across both UOB bank (http://www1.uob.com.my/webpages/p_deposits_ForeignCurrency.htm) and Public Bank (http://ww2.publicbank.com.my/cnt_press207.html) that offer these kind of savings.

The ONLY risk that comes with the investment is the foreign currency conversion rate. How is that? Assuming you have made a 3-months deposit of RM10,000 into New Zealand saving account on 1/1/2007, and the conversion rate during that time is NZD1.00 to RM2.50, that means you have made RM10,000/2.5=NZD4,000 deposit in New Zealand.

During the 3 months period before maturity, our Ringgit Malaysia grows in value and as at 1/4/2007, the conversion rate is NZD1.00 to RM2.00. If you decide to end your deposit account, your capital would have shrink from RM10,000 to RM8,000, a total capital loss of RM2,000! However, if the conversion rate is NZD1.00 to RM3.00 and you decide to end your deposit account, your capital would have grow from RM10,000 to RM12,000, a total capital gain of RM2,000!

Above is just an extreme illustration to show the impact of investing in foreign accounts. So long your earned interest is more than the loss in conversion rate, it still a worthy investment.

Lastly, the high deposit amount, around RM10,000 may prevent the majority of us from investing in this.