Investing in Australian and New Zealand deposits

Questions:

I like to ask your opinion about foreign currency deposit. They promise about 8% on Australian or NZ deposits placed for 6 months.

It seems to me that conversion back and forth to local currency, plus exchange rate fluctuations over a mere 6 months, would not wipe out the benefits of such high interest rate offered?

It seems quite safe to get at least 4% even in the worst case? Has someone ever done any retrospective desk study to prove the profitability and viability of such schemes on an average situation basis.

MY REPLY:

The exchange rate between Singapore dollar and Australian or New Zealand dollar can fluctuate by more than 5% over a 6 month period. It can wipe out the difference in interest rate between the two currencies. If Australian or New Zealand dollar appreciate, it will add to your return even further

Currently, these two currencies are at a high level, compared to other currencies. It may be risky to invest in them now, unless you are sure that it can maintain its current value or even go higher.

I have written on this matter in one of my blog posting. Go to my blog, www.tankinlian.blogspot.com and search for "foreign currency".