Singaporean investors typically seek low-risk solutions in periods of foreign exchange instability to protect capital while acquiring currency exposure. USD fixed deposits, particularly those with promotional rates, are increasingly regarded as a viable hedge against a falling Singapore dollar (SGD). Unlike more risky products such as FX trading or foreign shares, fixed deposits provide principal protection, assured interest returns, and the possibility of currency appreciation. Individuals and organisations can diversify their holdings while limiting forex risk by taking advantage of competitive USD fixed deposit rates offered by both local and foreign banks.
Why Consider USD Fixed Deposits in a Weak SGD Environment?
Converting and holding USD becomes relatively more profitable when the SGD depreciates against the USD. USD fixed deposits allow investors to park funds in US dollars, thereby shielding them from further SGD weakening. Once the USD continues to strengthen during the deposit tenure, investors benefit not only from the fixed interest rate but also from higher SGD-equivalent returns upon maturity. This instance makes USD fixed deposits an attractive hedge for those expecting prolonged SGD weakness due to macroeconomic pressures, lower interest differentials, or geopolitical volatility impacting regional currencies.
Understanding USD Fixed Deposit Rates and Their Relevance
Unlike SGD fixed deposits, which are influenced heavily by the Monetary Authority of Singapore’s stance and local liquidity conditions, USD fixed deposit rates are typically benchmarked against US Federal Reserve policy. As of 2025, the Fed’s ongoing higher-for-longer rate approach has kept USD deposit rates attractive, with some local banks offering rates upwards of 4.5% to 5% per annum for 6- to 12-month placements. These rates offer investors who are comfortable with holding USD a compelling alternative to domestic fixed income products that may yield lower returns in SGD terms.
It is necessary to compare both standard and promotional rates. Fixed deposit promotions can significantly boost yields but often come with minimum deposit thresholds, specific tenures, or limited-time offers. Investors can make informed decisions that maximise their hedge strategy by evaluating the effective annual yield alongside expected currency gains.
Diversifying with Currency in Mind
Hedging with USD fixed deposits should not be seen as a speculative bet on forex markets. Instead, it is about prudent currency diversification. For example, a Singaporean investor expecting SGD to depreciate can allocate a portion of their portfolio—say 20%—into USD fixed deposits with staggered tenures. This approach not only locks in attractive returns through fixed deposit promotions but also creates rolling liquidity in USD terms. Should the SGD continue to weaken, reinvestments can be made at potentially better conversion rates.
It is also common for high-net-worth individuals and SMEs to use USD deposits as a way to manage cross-border operational risks. Businesses with incoming USD revenue or USD-denominated liabilities may benefit from matching assets in USD fixed deposits, thereby reducing conversion losses or timing mismatches. Some corporates go further by laddering deposits across different maturities and banks to spread both interest rate and liquidity risk.
Key Considerations Before You Commit
Investors should consider several factors before rushing into a USD fixed deposit strategy. First is the exchange rate risk; if the SGD strengthens unexpectedly, the conversion back from USD could erode the gains from interest. Secondly, liquidity is constrained during the lock-in period, and early withdrawals often come with forfeited interest or penalties. Thirdly, not all promotions are equal; some may include fine print that affects eligibility, rollover conditions, or automatic renewal terms at much lower standard rates.
Additionally, banks differ in their requirements. Some may only accept USD deposits from accredited investors, while others offer walk-in promotions for retail clients. Always verify the deposit insurance status for foreign currency deposits as well. After all, SDIC coverage typically applies only to SGD deposits.
Conclusion
Using USD fixed deposits as a hedge against SGD weakening is a practical approach for Singapore-based investors seeking capital protection, income security, and currency diversification. Due to competitive USD fixed deposit rates and ongoing fixed deposit promotions available across various banks, this tool offers a low-risk way to manage forex exposure while earning passive returns. However, like all financial products, it should be integrated into a broader portfolio with attention to liquidity needs, conversion costs, and market conditions.
Visit RHB Bank to take advantage of competitive USD fixed deposit rates today.