Dual Currency Deposit
A dual currency deposit is a type of foreign exchanged linked fixed deposit that offers flexible terms for the currency of payment. Deposits may be made in one currency, while the withdrawal at maturity may be done either in the same currency as the initial deposit or in another currency, as agreed upon. This type of investment allows an investor to benefit from higher return than normal deposits, but also involves higher risk for the investor. At maturity, depending on market performance, the investor risks receiving fewer funds than originally deposited or may receive significantly higher interest than a normal deposit and in the different currency.
A dual currency deposit may involve a foreign exchange risk for the investor, who may earn or lose money for the risk taken. The principal may be repaid after it is converted into the chosen alternative currency on maturity, complying with the value of the spot exchange rate. For example, if an investor pays the principal in USD, he may receive the funds on maturity in AUD, if that is the currency he has chosen.