Ask Melanie

Should I switch my HK dollar savings?

Melanie Nutbeam, a certified financial planner based in Hong Kong, addresses common personal finance queries. Send your questions to

PUBLISHED : Monday, 01 October, 2012, 12:00am
UPDATED : Monday, 01 October, 2012, 4:09am

Should I switch my Hong Kong dollar savings to Australian, or New Zealand, dollar term deposits to get better returns?

Current returns on Hong Kong dollars are negligible unless you have a relatively large sum to invest for a long term, so anything looks good by comparison. Take HK$3.5 million invested for six months. Your return would be about 1 per cent per annum whereas that same amount converted to Australian or New Zealand dollars and invested for the same period would give you a return about four times higher.

On the face of it, that looks attractive. But both currencies are trading at historically high levels. If either currency depreciates, even marginally, you could lose your interest earnings, while if the currency depreciates significantly, you will suffer a capital loss when you exchange your money back to Hong Kong dollars.

Of course, you could be lucky and find that at the end of six months the currency has appreciated further.

If that's the case, you earn your interest and make a gain on your capital and interest when you change it back to Hong Kong dollars.

"Luck" is the operative word here because, as my favourite economist says: "All exchange rate forecasts are born useless and die the same way."

There is a huge range of different factors that influence whether a currency moves up or down. These include interest rates, inflation, current account deficits and political stability.

Economists have failed to produce a reliable exchange rate forecasting model. So unless you have a strategy that takes into account that the currency might move against you, you might be better off forgoing the short-term appeal of higher returns on term deposits in other currencies.

A bird in the hand might be worth two in the bush.

The views presented are of a general nature. For specific advice, talk to a professional planner. See the column archive at