Limited upside gain for a Dual Currency deposit

Dear Mr. Tan,

About three months ago, I was persuaded to buy a dual currency deposit. It was for the Japanese Yen. I wanted to buy Japanese Yen as I saw that it was rising. I was persuaded to pair it with Singapore dollar and given 18.2%.

I took it and eventually when it matured two weeks later, I got back Singapore dollars. Based on your calculations, would it be better for me to buy yen straight? My gut feeling was that I faced unlimited downside risk and was deprived of unlimited upside gain for a small return since it was only two weeks interest.

I will not go for a dual currency deposit in the future.

REPLY:

I am not sure if your 18.2% quoted is correct. If so, then you earn 0.7% for 2 weeks (i.e. 18.2% * 2 / 52 weeks).

If you have invested in the Yen directly, you could have earn 2% to 5% for the period, if the Yen had appreciated significantly. If the Yen had depreciated 2% to 5%, you would have taken the entire loss.

I would not take the risk of a large loss (say 2% to 5%), for a limited gain, i.e. 0.7% for 2 weeks?