Dual Currency Returns (DCR) allow clients to potentially benefit from enhanced yields that could be 10% p.a. or even higher#. Clients have the flexibility of choosing the currency pairing – namely the placement (base) currency, an alternate currency, tenor of the investment and the strike price (conversion rate). On maturity you will receive the principal plus the enhanced yield earned in either the base or alternate currency, at the pre-agreed strike price.
# Depending on chosen currency pair, tenor and prevailing market conditions.
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Benefits of Dual Currency Returns
Enjoy many benefits such as:
Potential to earn substantially higher interest rates than traditional time deposits.
Selecting the placement (base) and alternate currencies, tenor* of investment and strike price that you are comfortable with.
Choosing from a wide range of currencies** (SGD, USD, EUR, GBP, AUD, NZD, CHF, JPY, etc) to suit your needs.
* Subject to conditions, available DCR tenors typically range from 1 week to 1 month
** Subject to availability and prevailing market conditions
Suitability of Dual Currency Returns
This investment is suitable for those:
Seeking potentially higher interest returns than time deposits; or
Receptive towards receiving either the base currency or the alternate currency; or
With the potential need for the alternate currency because they:
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Conduct business transactions in the alternate currency
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Have investment properties and housing loans in the alternate currencies
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Have potential investments in the alternate currency; or
Who think that the base currency would be weakening against the alternate currency.
How Dual Currency Returns Works
The following scenario analyses are provided for illustrative purposes only. They do not present all possible outcomes or describe all possible factors that may affect the value of the proposed transaction.
Place USD 100,000.00 base currency in a DCR for 2 weeks and choose NZD as an alternate currency.
If the strike price is fixed at 0.7520, you will receive an interest rate of 9% p.a. on your USD placement (assuming current NZD / USD rate is 0.7570).
Here are the 2 scenarios^ upon maturity.
SCENARIO 1 NZD/USD is higher than 0.7520, i.e. NZD has strengthened against USD.
You will receive principal and interest in USD = USD 100,000.00 + USD 350.00 = USD 100,350.00
Assuming that the USD 2-week deposit rate is about 2.0 % p.a., your interest income would be USD77.78 after 2 weeks.
By participating in the DCR, your interest yield at 9% p.a. is 4.5 times more!
SCENARIO 2 NZD/USD is lower than 0.7520, i.e. NZD has weakened against USD.
You will receive principal and interest in NZD = USD 100,350.00 / 0.7520 = NZD 133,444.15
Your principal and interest of 9% p.a. is repaid in NZD
Assuming current NZD/USD rate is 0.7450, converting the NZD 133,444.15 back to USD would result in you getting only USD 99,415.89 (i.e. less than initial USD 100,000.00).
Place SGD 100,000.00 base currency in a DCR for 1 month and choose AUD as an alternate currency.
If the strike price or conversion rate is fixed at 1.3060, you will receive an interest rate of 5.00% p.a. on your SGD placement (current exchange rate = 1.3110).
Here are the 2 scenarios^ upon expiry:
SCENARIO 1 AUD/SGD is higher than 1.3060, i.e. AUD has strengthened against SGD.
You will receive principal and interest in SGD = SGD 100,000.00 + SGD 410.96 = SGD 100,410.96
As the SGD 1-month deposit rate is about 0.5% p.a., your interest income would be SGD 41.10 after 1 month.
By participating in the DCR, your interest yield at 5.00 % p.a. is 10 times more.
SCENARIO 2 AUD/SGD is lower than 1.3060, i.e. AUD has weakened against SGD.
You will receive principal and interest in AUD = SGD 100,410.96 / 1.3060 = AUD 76,884.35
Your principal and interest of 5% p.a. is repaid in AUD.
Similarly, if AUD/SGD rate is 1.2960, converting the AUD 76,884.35 to SGD would result in you getting SGD99,642.12 (less than initial SGD 100,000.00).
^ If the Strike Price is equal to the market spot rate as determined by the calculation agent (the “Calculation Agent”), OCBC Bank has the right, but not the obligation, to pay the investor on the Maturity Date the principal plus interest of the DCR in the Alternate Currency calculated at the Strike Price; or if OCBC Bank does not exercise the above option, the investor will be paid the principal plus interest of the DCR in the Base Currency on the Maturity Date.
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Risks of Dual Currency Returns
DCR is an investment that offers possible enhanced returns and involves a currency option which confers on OCBC Bank the right to repay the principal sum at maturity in either the base or alternate currency and part or all of the interest earned on this investment represents the premium on this option. Please read the terms and conditions governing DCRs carefully. You should ensure that you have sufficient funds and/or the necessary liquidity to enable you to hold DCR with OCBC Bank until its maturity date.
The information provided herein is intended for general circulation and/or discussion purposes only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person.
Without prejudice to the generality of the foregoing, you may wish to seek advice from a licensed or an exempt financial adviser before making a commitment to purchase this product. In the event that you choose not to seek advice from a licensed or an exempt financial adviser, you should carefully consider whether this product is suitable for you.
Any forecast of the economy, stock market, bond market and economic trends of the markets, or any illustration of past performance of DCRs or its underlying foreign currencies are not necessarily indicative of the future or likely performance of such DCRs. The scenario analysis is provided for illustrative purposes only and is not an indication of any future performance. It does not reflect a complete analysis of all possible scenarios that may arise or describe all possible factors that may affect the value of an actual transaction. All opinions and estimates are given as of the date hereof and are subject to change. The value of any transaction may fluctuate as a result of market changes.
Unlike traditional deposits, DCRs have an investment element and returns may vary. By purchasing DCRs, you are giving OCBC Bank the right to repay you at a future date in an alternate currency that is different from the currency in which your initial investment was made, regardless of whether you wish to be repaid in this currency at that time. DCRs are subject to foreign exchange fluctuations which may affect the return of your investment. You may incur a loss on your principal sum in comparison with the base amount initially invested.
Exchange controls may also be applicable to the currencies your investment is linked to. As a result, the principal and interest of your DCRs may be paid to you in an alternate currency and you may receive less than the principal amount initially invested, when the amount of this alternate currency is converted back to the base currency. You may be able to obtain information on foreign exchange control restrictions, if any, in respect of each foreign currency offered in relation to DCRs, from the monetary, regulatory or other governmental authorities of the home jurisdiction of the respective foreign currency.
DCRs are not insured deposits for the purposes of the Deposit Insurance Act Chapter 77A of Singapore.
OCBC Bank will not terminate DCRs prior to maturity. You may withdraw the principal prior to maturity date. In the event of premature withdrawal of DCRs, you will have to bear the applicable cost or charges which are calculated based on prevailing market conditions such as strike price, foreign exchange rate, volatility of underlying foreign exchange pair and remaining tenor of DCRs. As a result of such early withdrawal charges, you may incur a loss on the principal amount upon withdrawal. To find out the details on the procedures and charges applicable for early withdrawal of DCRs, please approach our Personal Financial Consultants or your Relationship Manager.
