Fri, Jan 24, 2014 - Page 14 News List

DBS shows public lacks foreign exchange savvy

MAKING MONEY:A survey conducted by DBS found most Taiwanese are not knowledgeable on exchange investment despite owning foreign currency accounts

By Crystal Hsu  /  Staff reporter

Taiwanese have poor knowledge about foreign currency investment though many have a foreign currency account and watch the market closely, a survey by DBS Bank Taiwan showed yesterday.

About 50 percent of the respondents owned a foreign currency account, but a surprising 94.3 percent scored below 60 percent on foreign-exchange-related questions, indicating the public lacked the knowledge on the subject, DBS Taiwan general manager Jerry Chen (陳亮丞) said.

“A big majority, 68 percent, believe interest rates are the most important factor when investing in foreign exchange market and overlook that exchange rates play a bigger role in affecting profit,” Chen said.

Investors may gain interest, but still incur losses in the end because fluctuations in the exchange rate can erode interest, especially when the negative interest spread is larger than the yield rate, Chen said.

In terms of currency investments, 53 percent wrongly believed the fewer the currency types, the better the portfolio, Chen said, adding it is better to take advantage of different currencies.

High-yield currencies offer higher interest rates, but carry higher risks, whereas the US dollar serves a better hedging purpose because it holds relatively stable in times of market fluctuations, Chen said.

Although more than 60 percent of respondents said they watch foreign exchange markets closely, 62 percent are not clear about the differences between the four posted rates: cash buy, cash sell, telegraph transfer bank buy and telegraphic transfer bank sell, the survey found.

The greenback is by far the most popular foreign currency, with 85.7 percent keeping the currency, followed by the yuan at 25 percent, the Australian dollar at 19 percent, the euro at 16.2 percent and the Japanese yen at 15.6 percent, according to the survey.

As Taiwan is easing restrictions on yuan investment, an increasing number of Taiwanese will add yuan to their foreign currency portfolio, Chen said, adding that expectations of yuan appreciation could also help boost yuan popularity.

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