Decay On Net

It has been 1 year since I started my New Zealand currency fixed deposit account with UOB. I just got my second payment of interest earned.

I started the NZD fixed deposit with SGD$6055.20, which convert to NZD is $6000. The exchange rate between SGD and NZD has been rising slowly and steadily for the past one year. Even the recent global market flu didn’t do much damage.

I got my first interest payment in Oct 06. The interest back then was SGD $200. This time round, I got SGD $220 as interest. This is because of the higher exchange rate and higher interest.

So for 1 year, I made a total of $420 as interest. That is almost 7% interest rate. Try finding a fixed deposit that does that!

And on top of that, the exchange rate is also higher now. When I started the NZD fixed deposit, the exchange rate is at a low 1.0092. The exchange rate now is 1.077. I know the difference is less than $0.06. But multiply that by $6000 and you get around $400. Meaning if I withdraw the money now and convert it back to SGD, I’ll make another $400 earning on exchange rate.

Therefore, I made around $820 using $6055 in just one year without doing anything. That is 13.5%!!! This is certainly much better than leaving my money in savings account or SGD fixed deposit. And this is less risky than shares and funds.

But I’m not withdrawing the money now to get that $400 profit in exchange rate. The bank is currently giving me a 7.1% interest. I think I’ll hold this NZD fixed deposit for a few years.

Yes, there are risks involved. In fact, I have another USD fixed deposit which is making losses currently. Thinking if I should withdraw it to cut the losses or hold it and pray that USD will become stronger. Will wait for my first interest in May before making decision.

Posted by DK on Thursday, April 05, 2007 at 3:23 PM