An effective way to take advantage of foreign
exchange movement
What is Premium Deposit?
Premium Deposit is a currency-linked time deposit, which:
- Provides potential higher interest income than normal time deposits;
- Chances for investors to buy foreign currencies at lower rates#;
- A new feature to enable you to customize the deal with your chosen currency pair in a series of currencies, deposit tenure and conversion rate according to your investment needs.
How does it work?
On the deposit set up date, you will base on your preference to select the followings:
- a deposit currency,
- an alternate currency,
- a deposit tenure, conversion rate and based on your selection to come up with an agreed interest rate
On the fixing date*, Standard Chartered will compare the conversion rate with the relevant market rate to determine whether the principal and interest will be repaid in the deposit currency or your alternate currency.
Example:
The customer expects that AUD interest rate will go upward. AUD exchange rate may strengthen on this expectation.
1) Comparison between Premium Deposit and normal time deposit
| Premium Deposit | Normal Time Deposit | |
| Deposit Currency | USD | USD |
| Deposit Amount | USD200,000 | USD200,000 |
| Deposit Tenure | 2 weeks | 2 weeks |
| Alternate Currency | AUD | N/A |
| Market Rate (AUD against USD) |
0.8746 | N/A |
| Conversion Rate (AUD against USD) |
0.8715 | N/A |
| Interest Rate | 9.7460% p.a. | 1.9% p.a. |
| Principal + Interest (P+I) on maturity |
USD200,758.02 (If the market exchange rate of AUD against USD appreciates, P+I will be paid in deposit currency) or AUD230,359.17 (If the market exchange rate of AUD against USD depreciates or is the same as the conversion rate, P+I will be paid in alternate currency at the conversion rate) |
USD200,147.78 |
2) Return and Risk Analysis of Premium Deposit
With reference to the above Premium Deposit example of USD200,000 using AUD as the alternate currency, on fixing date:
| Principal + Interest |
Fixing Rate^ | Return & Risk Analysis | ||
| If converted to deposit currency at fixing rate^ |
Net Return | |||
| Scenario 1 AUD appreciates against USD |
USD 200,758.02 |
0.8750 | N/A | Gain USD758.02 |
| Scenario 2 AUD against USD is the same as the conversion rate |
AUD 230,359.17 |
0.8715 | USD 200,758.02 |
Gain USD758.02 |
| Scenario 3 AUD depreciates against USD |
AUD 230,359.17 |
0.8680 | USD 199,951.76 |
Loss USD48.24 |
^ Fixing rate refers to the prevailing market rate as quoted by the Bank on the fixing date.
Note: The examples shown are for illustration only and the rates in example 1 are quoted from 16 July 2007 and shall not constitute any representation or guarantee by the Bank in respect of any possible gains or losses.