SOURCE http://biz.thestar.com.my

PETALING JAYA, MALAYSIA: Foreign currency deposits or accounts in the country have increased after the exchange rates of several currencies dropped about 30% or more against the ringgit over the last few months, according to senior banking officials.

More liberal forex regulations had also boosted foreign currency deposits, they said.

“First, foreign currencies offer a way to protect their (local customers) cash holdings against fluctuations.

“This is especially when they have frequent or upcoming needs for foreign currencies,” Standard Chartered Bank Malaysia Bhd head of wealth management, Choong Wai Hong, told StarBiz.

Some of the needs include travelling, personal or children’s education, remittances, overseas investments or large purchases.

According to HSBC Bank Malaysia Bhd personal financial services general manager, Lim Eng Seong, the currencies that were sought after included the US dollar, pound sterling, Australian dollar and the euro.

“One of the main reasons that these currencies are in demand is for education purposes as these countries are favourite destinations for overseas studies,” Lim added.

According to production manager Kesavan Keecha, the declining value of the Australian dollar has been encouraging as he has to pay for his son’s education fees in Australia.

“The Australian dollar has fallen a lot since a year ago when my son started his studies there,” he said, adding that the exchange rate of the ringgit against the Australian dollar was 3.1 a year ago compared with 2.3 currently.

Another pull factor was the higher interest rates offered by some banks for foreign currency deposits, Choong said.

“Standard Chartered offers 4.5% to 6% in interest yields for currency deposits in pound sterling, Australian and New Zealand dollar, depending on the tenure and currency selected,” he said.

Currency speculation was another factor.

“The flip side is, of course, it also exposes depositors to currency depreciation,” he added.

Lim said the liberalisation of foreign exchange administration rules by Bank Negara in April last year had opened up the market to Malaysians.

“This has led to customers’ interest and boosted foreign currency deposit sign-ups,” Lim said.

For Bank Negara reports click here