Currency Linked Investments

Currency Linked Investment

How Does CLI Work?

Assuming AUD/SGD spot rate is trading at 1.2800 and you invest SGD 100,000.

STEP 1 Choose your base currency (the original currency invested): SGD
STEP 2 Choose your alternate currency: AUD
(the alternate currency which you are comfortable in holding)
STEP 3 Agree on a strike rate: 1.2700
(the rate which you are comfortable in exchanging your base currency for the alternate currency)
STEP 4 Choose a tenor: 1 Month (30 days)

Based on your chosen currency pair, strike rate and tenor, the Bank determines that the enhanced yield (in base currency) is 5.0% p.a.

On the fixing date (2 business days before maturity), the prevailing exchange rate (spot rate) will be compared against the strike rate to determine whether you will be repaid the maturity proceeds in the base currency or the alternate currency.

If you are to be repaid in the alternate currency, the strike rate will be used to convert the maturity proceeds.

1 month later on fixing date (2 business days before maturity):

1.2750
(Spot Rate)

1.2700
(Strike Rate)

1.2600
(Spot Rate)

Scenario 1

AUD strengthens against SGD compared to the strike rate (e.g. AUD/SGD rate is trading at 1.2750: spot rate is higher than strike rate).

You will receive your original investment + 1 month enhanced yield of 5.0% p.a. in SGD on maturity.

= SGD 100,000 + (100,000 x 5.0% x 30 / 365)
= SGD 100,000 + 410.96
= SGD 100,410.96

Scenario 2

AUD weakens against SGD compared to the strike rate (e.g. AUD/SGD rate is trading at 1.2600: spot rate is lower than strike rate).

You will receive your original investment + 1 month enhanced yield of 5.0% p.a., converted to AUD at the strike rate of 1.2700 on maturity.

= AUD [(100,000 + 410.96) / 1.2700]
= AUD 79,063.75*

*Depending on the spot rate at maturity, immediate conversion back to base currency may result in an excess or shortfall. When the spot rate on fixing date equals the strike rate, you will receive the aggregate of the original investment amount and the enhanced yield in the alternate currency.

All figures and rates used above are for illustration purposes only. The above illustrations are not indicative of the likely or future performance of a CLI and do not cover all possible scenarios.