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Watching foreign currency movements? Earn from interest
rate differential by borrowing a low-interest rate
currency and re-investing it in a higher yielding
currency.
What You Get
- An amount up to 5 times your deposit amount for
trading
- Flexibility to trade in a choice of 10 currencies:
USD, YEN, EUR, AUD, GBP, CHF, CAD, NZD, SGD &
HKD
- A “forward exchange contract” feature
you can use to control exchange risks
- Personalized attention and expertise of a Treasury
Services Manager
What You Need
- Minimum US$50,000 deposit for a US$250,000 trading
line
- Leverage investment is available in tenures ranging
from 2 weeks to 12 months.
- The tenures for deposit and loan amount must
be the same
How To Apply
- Contact your Relationship Manager
Important:
The risk of loss in leveraged foreign exchange
trading may be substantial. You may sustain loss in
excess of your initial margin funds. Placing contingent
orders, such as “stop-loss” or “stop-limit”
orders will not necessarily limit losses to the intended
amounts. Market conditions may make it impossible
to execute such orders, and you may be called upon
at short notice to deposit additional margin funds.
If the required funds are not provided within the
prescribed time, your position may be liquidated.
You shall remain liable for any resulting deficit
in your account. You should therefore carefully consider
whether such trading is suitable in the light of your
own financial position and investment objectives.
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How does it work?
An example
Mr Lee needs to pay a USD loan at 2% p.a.
At the same time, he has a
AUD deposit that earns him 3.5% p.a.
Through a Leverage Loan account, he pledges a USD
Time Deposit with Citibank to obtain a loan of up
to 5 times the pledged amount.
| Minimum
initial deposit |
|
Leverage
Loan |
| USD 100,000 |
 |
USD 500,000 |
Step 1:
Convert Leverage Loan amount of USD 500,000 to AUD
At a rate of AUD / USD 0.6500… USD 500,000
is equivalent to AUD 769,231
Step 2:
Place AUD 909,091 in a 1-month Leverage Deposit to
earn higher interest.
| 1-month
AUD Leverage Deposit at 3.5% p.a. |
| Principal |
AUD 769,231 |
| Interest earned |
AUD 2,244 |
| At the end of 1 month, you will
earn an interest of AUD 2,244.
|
Step 3:
Use interest earned to service the interest on your
Leverage Loan
Depending on the prevailing exchange rate,
your returns can be:
| Scenario
1: Assuming AUD / USD remains unchanged
at 0.6500. |
| |
1-month
AUD Deposit at 3.5% p.a. |
1-month
USD Loan at 2% p.a. |
Total
Earnings / (Loss) |
| Principal |
AUD
769,231 |
USD
500,000 |
(a)
– (b) |
| Interest |
AUD
2,244 |
USD
833 |
USD
626 |
| Total |
AUD
771,475 |
USD
500,833 |
|
| Total in USD
at AUD/USD 0.6500 |
(a)
USD 501,459 |
(b)
USD 500,833 |
|
Upon maturity, you
have earned USD 626.
This works out to be 7.5% p.a. on your initial
deposit of USD 100,000. |
| Scenario
2: Assuming AUD strengthens, AUD / USD
exchange rate is 0.6550 |
| |
1-month
AUD Deposit at 3.5% p.a. |
1-month
USD Loan at 2% p.a. |
Total
Earnings / (Loss) |
| Principal |
AUD
769,231 |
USD
500,000 |
(a)
– (b) |
| Interest |
AUD
2,244 |
USD
833 |
USD
4,483 |
| Total |
AUD
771,475 |
USD
500,833 |
|
| Total in USD
at AUD/USD 0.6550 |
(a)
USD 505,316 |
(b)
USD 500,833 |
|
| Upon maturity, you
have earned USD 4,483 on your initial deposit
of USD 100,000. |
Scenario
3: As with every investment, there
are gains as well as possible losses.
Assuming AUD weakens, AUD / USD exchange rate
is 0.6450. |
| |
1-month
AUD Deposit at 3.5% p.a. |
1-month
USD Loan at 2% p.a. |
Total
Earnings / (Loss) |
| Principal |
AUD
769,231 |
USD
500,000 |
(a)
– (b) |
| Interest |
AUD
2,244 |
USD
833 |
(USD
3,232) |
| Total |
AUD
771,475 |
USD
500,833 |
|
| Total in USD
at AUD/USD 0.6450 |
(a)
USD 497,601 |
(b)
USD 500,833 |
|
| Upon maturity, you
have lost USD 3,232 on your initial deposit of
USD 100,000. |
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What are my risks?
- The risk of loss in leveraged foreign exchange
may be substantial.
- You may stand to gain as well as lose.
- You should discuss with your Relationship Manager
to ascertain if this product is suitable for you
in the light of your financial position and investment
objectives.
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Leverage Loan
