Currency Switch
Currency Switch is a structured investment product that composed of time deposit and FX forward contract(s) for you to capture additional potential return on your investment from FX market.
How to apply
Currency Switch is a structured investment product that composed of time deposit and FX forward contract(s) for you to capture additional potential return on your investment from FX market.
How to apply
By entering into FX forward contract(s) under Currency Switch, it helps you to capture the potential return from FX trading.
Hedge against the depreciation of time deposits before maturity.
On maturity, the principal and interest of the time deposit will be converted to the designated currency of the final FX forward contract at the agreed exchange rate.
Unlimited FX forward transactions within time deposit period (eligible for time deposits with remaining period not exceeding 12 months).
Currencies of your choice, including HKD, USD, EUR, GBP, AUD, NZD, CAD, JPY, CNY, SGD and CHF.
Time deposit with amount as low as HKD100,000 or equivalent are eligible for Currency Switch transaction.
Subject to the Terms and Conditions of Investment Account, including “Schedule VI: Currency Switch”
The customer sets up a 3-month HKD time deposit on 2 January 20XX. During the deposit period, customer wants to catch up the uptrend of NZD, he sets up a FX forward contract through Currency Switch as follows:
| Time deposit details | |
|---|---|
| Principal | HKD1,000,000.00 |
| Time Deposit Start Date | Jan 2, 20XX |
| Time Deposit Maturity Date | Mar 31, 20XX |
| No. of days | 89 days |
| Interest Rate | 1% |
| Principal & Interest on Maturity | HKD1,002,438.36 |
| Currency Switch details | |
|---|---|
| FX Forward Contract enter Date | Jan 10, 20XX |
| Sell Currency | HKD |
| Sell Amount | HKD1,002,438.36 |
| Buy Currency | NZD |
| Buy Currency Amount | NZD199,221.02 |
| Forward Exchange Rate | 5.031790 |
| Spot Rate on Deposit Maturity Date | Value at Maturity Date | Net gain / (loss) | Rate of Return (Actual%) |
|
|---|---|---|---|---|
| 1. Best case scenario – Switched Currency spot rate strengthens against Forward Exchange Rate on maturity date | ||||
| NZD strengthens against HKD | 5.123123 | NZD199,221.02 (equivalent to HKD1,020,633.79) |
HKD18,195.43 | 1.82% |
| 2. Breakeven scenario – Switched Currency spot rate against Forward Exchange Rate remains unchanged on maturity date | ||||
| NZD against HKD remains unchanged | 5.031790 | NZD199,221.02 (equivalent to HKD1,002,438.36) |
HKD 0.00 | 0.00% |
| 3. Losing scenario – Switched Currency spot rate weakens against Forward Exchange Rate on maturity date | ||||
| NZD weakens against HKD | 5.019551 | NZD199,221.02 (equivalent to HKD1,000,000.00) |
(HKD2,438.36) | -0.24% Loss of interest of the time deposit |
| 4. Losing scenario – Switched Currency spot rate weakens against Forward Exchange Rate on maturity date | ||||
| NZD weakens against HKD | 5.000000 | NZD199,221.02 (equivalent to HKD996,105.10) |
(HKD6,333.26) | -0.63% |
| 5. Worst case scenario – Switched Currency spot rate depreciates to zero on maturity date | ||||
| NZD depreciates to zero | 0.000000 (exchange rate down turning to zero) |
NZD199,221.02 (equivalent to HKD0.00) |
(HKD1,002,438.36) | Loss of entire Principal Amount plus interest of the time deposit |
| 6. Insolvency scenario – The Bank defaults | ||||
| If the Bank becomes insolvent or goes into liquidation, you may lose the entire Principal Amount plus interest of the time deposit. | ||||
Remarks:
i) The interest of HKD is calculated on the basis of 365 days per year.
ii) Net gain / (loss) will only be realized if customer switched the amount back to time deposit currency on Deposit Maturity Date.
The customer sets up a 6-month USD fixed deposit on 2 March 20XX. During the deposit period, customer intends to make use the fluctuation of FX to capture extra potential return, he sets up FX forward contracts through Currency Switch as follows:
| Time deposit details | |
|---|---|
| Principal | USD100,000.00 |
| Time Deposit Start Date | Mar 2, 20XX |
| Time Deposit Maturity Date | Aug 31, 20XX |
| No. of days | 182 days |
| Interest Rate | 2% |
| Principal & Interest on Maturity | USD101,011.11 |
| Currency Switch details | |||
|---|---|---|---|
| FX Forward Contract enter Date | Transaction details | Forward Exchange Rate | Maturity Date / Settlement Date |
| Mar 20, 20XX | Sell USD101,011.11 | 7.752450 | Aug 31, 20XX |
| Buy HKD783,083.58 | |||
| Apr 20, 20XX | Sell HKD783,083.58 | 5.934420 | Aug 31, 20XX |
| Buy AUD131,956.21 | |||
| Jun 30, 20XX | Sell AUD131,956.21 | 1.789626 | Aug 31, 20XX |
| Buy GBP73,733.96 | |||
| Jul 15, 20XX | Sell GBP73,733.96 | 1.131959 | Aug 31, 20XX |
| Buy EUR83,463.82 | |||
| Spot Rate on Deposit Maturity Date | Value at Maturity Date | Net gain / (loss) | Rate of Return (Actual%) |
|
|---|---|---|---|---|
| 1. Best case scenario – Switched Currency spot rate strengthens against Forward Exchange Rate on maturity date | ||||
| EUR strengthens against USD | 1.222525 | EUR83,463.82 (equivalent to USD102,036.61) |
USD1,025.50 | 1.02% |
| 2. Breakeven scenario – Switched Currency spot rate against Forward Exchange Rate remains unchanged on maturity date | ||||
| EUR against USD remains unchanged | 1.210238 | EUR83,463.82 (equivalent to USD101,011.09) |
(USD 0.02) | 0.00% |
| 3. Losing scenario – Switched Currency spot rate weakens against Forward Exchange Rate on maturity date | ||||
| EUR weakens against USD | 1.198124 | EUR83,463.82 (equivalent to USD100,000.00) |
(USD1,011.11) | -1.00% Loss of interest of the time deposit |
| 4. Losing scenario – Switched Currency spot rate weakens against Forward Exchange Rate on maturity date | ||||
| EUR weakens against USD | 1.189898 | EUR83,463.82 (equivalent to USD99,313.43) |
(USD1,697.68) | -1.68% |
| 5. Worst case scenario – Switched Currency spot rate depreciates to zero on maturity date | ||||
| EUR depreciates to zero | 0.000000 (exchange rate down turning to zero) |
EUR83,463.82 (equivalent to HKD0.00) |
(USD101,011.11) | Loss of entire Principal Amount plus interest of the time deposit |
| 6. Insolvency scenario – The Bank defaults | ||||
| If the Bank becomes insolvent or goes into liquidation, you may lose the entire Principal Amount plus interest of the time deposit. | ||||
Remarks:
i) The interest of USD is calculated on the basis of 360 days per year.
ii) Net gain / (loss) will only be realized if customer switched the amount back to time deposit currency on Deposit Maturity Date.
The above hypothetical examples are for illustrative purposes only. They do not reflect a complete analysis or all possible factors of all possible potential gain or loss scenarios. They are not based on the past performance of the exchange rates of the switched currency and must not be relied on as an indication of the actual performance of the exchange rate of the switched currency or this product. The Bank is not making any prediction on future movements of the exchange rates on the switched currency by virtue of providing the illustrative examples. You should not rely on these examples when making an investment decision.
The scenarios assume no fees and charges incurred. In addition, all calculation results above are rounded off to two decimal places except for the exchange rates, which are rounded off to six decimal places.
