well i think the more the better. why because the copmpany acutally showing the truth to the customer, if the customer want to take the risk then go ahead.
they say usaully this unfd are later trasfer to oversea and not use for lacal

I put in NZ$ st 9% and AUD at 7.25% . The slippage between buying and selling is about 2.5 %. Assuming currency remains constant it is still more than double local FD rates after 1 year. So you have some forex exposure which can go either way. But I think NZ and Oz are relatively safer than Ringgit lor..

In Most of the local bank, once the FD matures, it will convert back to RM. So in the end, Banker's win we lose.
Why?
They will be the one earning the spread between buy and sell.

I calculated 5 year returns (oanda.com has historical prices) -- turns out you lose about 25% in 5 years with NZD. So annualized it's about 5% loss per year. If we assume interest rate is 8.5% p.a. we're looking at a real interest rate of about 3.5% per year, and that's before slippage.

Not worth it if you ask me

I don't know about local bank, but those foreign banks like Citi, Standard Chartered, OCBC etc, you don't need to convert back, you can auto-renew it until whenever you wish, be it 1 month ot 2 months or 1 year.

Therefore, it is a place for one to diversify FD money, but not a place for one to gain little bit extra from the interest rate. Instead put all FD in RM, one can put in AUD, NZD, GBP, Euro to hedge against potential RM depreciation.

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Added on April 16, 2008, 4:34 pmI think you get it wrong already. (or should be the other way round, as Rm does depreciate against NZD about 20+%)

Around 2003, NZD was trading at 2.05-2.22 range. Now NZD is 2.50 currently. If one put NZD 5 years back, one actually gain through NZD appreciation plus interest earned.

RM is actually very poor compared to all major currencies except against USD. Don't be fooled by RM appreciated against USD from Rm3.60 to 3.15 currently, it is mainly because of USD plunging not because of Rm appreciating. In fact, RM is actually depreciating against major currencies like Yen, Euro, AUD, GBP even NZD.

This post has been edited by cherroy: Apr 16 2008, 04:42 PM

Okay this is how I calculate :

Say capital 50,000.

I'm using the price history from March 1 03 to 16 Apr 08.

The lowest conversion rate is 0.35370, so if you convert you get 50000x0.35370 = 17,685 NZD

Now let's invert the exchange rates and look at the price history again.

The lowest conversion rate is 2.04420, so if you convert you get 17,685x2.04420 = 36,151.67 RM

So net loss = 50,000 - 36,151.67 = 13,848.33 (27.7%) or about 5.5% a year annualized.

Interest is 8.5% p.a so net interest is 8.5 - 5.5 = 3% p.a.

What am I doing wrong here ?

I dont know how u get ur rates.
But mine from Yahoo finance shows
1/04 - 0.47

4/08 - 0.40

1/04 - RM1 = NZD 0.47 you bought
4/08 - RM1.175 = NZD 0.47

How can you make losses?

Go to oanda.com -- it's in the FX history section. Yours is not so valid because you randomly pick two days. Mine is a worst-case situation, you pick the two lowest conversion rates.

Friend, you are mess up on this case. The lowest 2.04420 is during 2003 time. Now is 2.50. So you only lose 25% if you are origin of NZD aka mean you convert your NZD to RM at 2003 and convert back to NZD at present time

For simple scenario,

On March 2003, if you have RM 50K, with the rate around 2003, let say you manage to convert it at 2.10 (2003 was traded and hovering around that price), you get NZD 23,809.
Then if you keep for 5 years. now with NZD rate at 2.50, if you convert back to RM, it will be 23,809 x 2.50 = 59,522.

So you gain RM9,552 on your RM50K
It is not taking of account of interest rate you gain during this 5 years.

Don't get me wrong, I am not promoting foreign currency FD, just to clarify the issue.

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Added on April 16, 2008, 5:39 pmNo wonder you lose on your calculation. He is valid also, as he doesn't pick extreme case or exchange rate. Exchange rate move is gradual over the time, it won't spike out and down quickly in one or two days time. Just like it takes years for NZD to go from 2.10 to 2.50.

Worst case scenario you mentioned is like I said before, you are a New Zealand person take NZD to convert to RM when 2003 time and keep for 5 years and convert back NZD at present time. So putting RM FD for the NZ person will yield as you mentioned, lose 25%. But not the other way round, for a Malaysian to put NZD FD.

Yes, you can lose out in Foreign currencies deposit if you put in wrong currency, like USD recent few year or just like I mentioned a New Zealand people put their NZD into RM.

So if one interested in foreign currency deposit, one needs to look at its currency strength and its economy status as currency movement is depended on the particular country economy strength.

So if one believes Malaysia economy is good with RM will appreciate against all major currencies then it is better to put as RM FD. As if it is the case, Foreign Currency deposit won't be good choice as you will lose out in the currency exchange.

But for the last few years, even though RM/USD from 3.60 to 3.15, RM is depreciating against most currencies.

So it is a place for one to diversify and protect against Rm depreciation but not a place to speculate to gain.

This post has been edited by cherroy: Apr 16 2008, 05:43 PM

I think I got it.. thanks anyone calculated worst case for RM/NZD with 8.25% FD rate ?

This post has been edited by wodenus: Apr 16 2008, 06:03 PM

saw your previous post, haha.



anyway, cherroy, the banks you mention here, the interest rate is 7-9% for New Zealand ?

Most banks are 7-9 for NZD I think. But what about slippage ?


This post has been edited by wodenus: Apr 16 2008, 06:04 PM

NZ interest rate is 8.25%. So mostly banks can offer 8.25% or lower, otherwise, if higher they are making a loss from it, so they might need a way to compensate it, like through exchange rate (buy & sell slippage of 2-3%).

Don't understand slippage much. What does slippage mean ?


This post has been edited by wodenus: Apr 16 2008, 06:19 PM

We're referring to the spread between the bank buying and selling the foreign currency which is about 2.7%. so if you put in foreign currency FD, it should be long term of at least 2 years to minimize this effect, assuming forex rates do not move significantly.

PB bank presently offers 9% p.a. At this rate you double your money in 8 years. Between NZ$ and Rm, I'm willing to place a fair bet on NZ.

provided that the interest on Nzd doesnt change for 8 whole year

Provided that they have an 8-year term correct ? whicyh bank has more than 1-year terms ? they have 5-year local FDs but not 5-year foregin currency FDs


This post has been edited by wodenus: Apr 17 2008, 11:57 AM

You can ask for some discount (1-2 cents) either on the 'buy/sell' side if your amount is large enough.

Another way to avoid the slippage and get the spot rate is using DCI structure product then you can get away the slippage on both sell and buy side. But DCI normally is 100K and above.

Which bank offers Forex DCI ?

Almost all foreign banks got.