By ELAINE ANG and SHARIDAN M. ALI
starbiz@thestar.com.my
Higher deposit rates and strengthening ringgit among reasons
PETALING JAYA: Banks continue to enjoy strong demand for foreign currency deposit accounts despite the strengthening ringgit and higher local interest rates.
While interest rates have risen, they are still relatively low at 2.4% to 3.0% (up to 12 months duration) compared with fixed deposit rates of popular foreign currencies such as Australian and New Zealand dollars.
Depositors have zeroed in on the Australian dollar foreign currency account, say bankers, as that currency offers a higher yield than what local deposit accounts would pay as well as Australia’s popularity as an educational destination.
Ong Shi Jie ... ‘Our recommendation of currency is very much dependent on customers’ needs.’ OCBC Bank (M) Bhd head of wealth management Ong Shi Jie said customers were looking to diversify their investment portfolio to include other currencies to enhance yields given the low interest rates offered by ringgit-denominated fixed deposits and also the turbulent equities market.
“We anticipate an increased acceptance of foreign currency fixed deposits by Malaysians partly due to the Government’s liberalisation of capital controls as well as the tougher investing environment in the equities space.
“This has, not surprisingly, led consumers to look for other avenues in their efforts to enhance yields. The low interest rate environment in Malaysia has also helped spur the hunt for alternatives,” she told StarBiz.
However, Ong cautioned that currency movements could be very volatile due to many factors.
“Our recommendation of currency is very much dependent on the customers’ needs.
“The identification of customers foreign currency needs is a crucial component of our sales process as opposed to taking a view on which currency would offer the best potential in terms of foreign exchange gains,’ she said.
According to Bank Negara statistics, total foreign currency deposits grew to RM48.3bil in May from RM40.4bil a year ago. The highest foreign currency deposit recorded in the period under review was RM52.4bil in March this year while the lowest was RM36.1bil in June 2009.
Public Bank Bhd chief operating officer Datuk Chang Kat Kiam said demand for foreign currency fixed deposit has also increased substantially due to the depreciation of major currencies such as the Australian dollar, Euro, New Zealand dollar, British pound and the US dollar against the ringgit.
For example, year-to-date the ringgit had appreciated by some 8.87% against the Australian dollar, thus making it a good time to accumulate the currency in expectation of future foreign exchange gains.
“The bank’s foreign currency deposits have recorded encouraging growth in the past six months with an average monthly growth of 5.91%,” Chang said.
Moving forward, he foresees demand for the major currencies to remain strong amid signs of slower global recovery which will lead to further tightening of interest rates by policy makers of these major currency countries.
The bank’s most popular currencies are US dollar, Australian dollar and British pound.
“The highest demand is for US dollar for trade purposes. The Australian dollar and British pound is in hot demand for investment and overseas education,” Chang said.
EON Bank Bhd head of wealth management and liabilities Low Kee Fui said the Australian dollar was the most popular currency based on recent customer trends.
“This is driven by parents who intend to send their children to pursue their studies in Australia as well as by investors looking to invest in Australia,” he said.
Low said the bank’s foreign currency deposit balance has grown by more than 50% in the past six months as the economy recovered and investor confidence returned.
“Going forward, we expect to see above average growth on the back of growing demand,” he said.
Malayan Banking Bhd deputy president and head (community financial services) Lim Hong Tat (pic) concurred.
“Currently the most popular is the Australian dollar, where interest rates range from 4.3% for a one-week deposit tenure to 5.05% for a year.
“This is followed by the New Zealand dollar offering interest rates from 2.6% for a one-month tenure to 3.75% for a year. The other currencies offer rates up to 0.3%,” he said.
PETALING JAYA: Banks continue to enjoy strong demand for foreign currency deposit accounts despite the strengthening ringgit and higher local interest rates.
While interest rates have risen, they are still relatively low at 2.4% to 3.0% (up to 12 months duration) compared with fixed deposit rates of popular foreign currencies such as Australian and New Zealand dollars.
Depositors have zeroed in on the Australian dollar foreign currency account, say bankers, as that currency offers a higher yield than what local deposit accounts would pay as well as Australia’s popularity as an educational destination.
Ong Shi Jie ... ‘Our recommendation of currency is very much dependent on customers’ needs.’ “We anticipate an increased acceptance of foreign currency fixed deposits by Malaysians partly due to the Government’s liberalisation of capital controls as well as the tougher investing environment in the equities space.
“This has, not surprisingly, led consumers to look for other avenues in their efforts to enhance yields. The low interest rate environment in Malaysia has also helped spur the hunt for alternatives,” she told StarBiz.
However, Ong cautioned that currency movements could be very volatile due to many factors.
“Our recommendation of currency is very much dependent on the customers’ needs.
“The identification of customers foreign currency needs is a crucial component of our sales process as opposed to taking a view on which currency would offer the best potential in terms of foreign exchange gains,’ she said.
According to Bank Negara statistics, total foreign currency deposits grew to RM48.3bil in May from RM40.4bil a year ago. The highest foreign currency deposit recorded in the period under review was RM52.4bil in March this year while the lowest was RM36.1bil in June 2009.
Public Bank Bhd chief operating officer Datuk Chang Kat Kiam said demand for foreign currency fixed deposit has also increased substantially due to the depreciation of major currencies such as the Australian dollar, Euro, New Zealand dollar, British pound and the US dollar against the ringgit.
For example, year-to-date the ringgit had appreciated by some 8.87% against the Australian dollar, thus making it a good time to accumulate the currency in expectation of future foreign exchange gains.
“The bank’s foreign currency deposits have recorded encouraging growth in the past six months with an average monthly growth of 5.91%,” Chang said.
The bank’s most popular currencies are US dollar, Australian dollar and British pound.
“The highest demand is for US dollar for trade purposes. The Australian dollar and British pound is in hot demand for investment and overseas education,” Chang said.
EON Bank Bhd head of wealth management and liabilities Low Kee Fui said the Australian dollar was the most popular currency based on recent customer trends.
“This is driven by parents who intend to send their children to pursue their studies in Australia as well as by investors looking to invest in Australia,” he said.
Low said the bank’s foreign currency deposit balance has grown by more than 50% in the past six months as the economy recovered and investor confidence returned.
“Going forward, we expect to see above average growth on the back of growing demand,” he said.
Malayan Banking Bhd deputy president and head (community financial services) Lim Hong Tat (pic) concurred.
“Currently the most popular is the Australian dollar, where interest rates range from 4.3% for a one-week deposit tenure to 5.05% for a year.
“This is followed by the New Zealand dollar offering interest rates from 2.6% for a one-month tenure to 3.75% for a year. The other currencies offer rates up to 0.3%,” he said.
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