WHAT IT IS

A Dual Currency Deposit (DCD) is a hybrid product that combines an investment strategy and a foreign exchange component.

 

HOW IT WORKS

1. A cash deposit is made in one currency (CAD or USD) for a specified term.

2. The yield and a foreign exchange rate against the other currency (USD or CAD) is agreed upon.

3. At maturity, the deposit and the earned interest is returned in either the original currency or converted to the other currency at the agreed upon rate.

4. Interest is earned irrespective of whether conversion takes place

 

ADVANTAGES

1. The potential to receive an exchange rate that is better than the prevailing spot/forward rate.

2. Earn an enhanced yield

 

RISKS

1. Although the conversion rate is better than the prevailing spot rate at the start date of the deposit, at expiry it may be less favorable than the prevailing spot rate.

2. The deposit is a fixed term deposit. It cannot be withdrawn or converted prior to expiry.

3. The currency returned is determined based on whether the DCD was converted.

 

WHO SHOULD USE THE DCD

1. Clients with large cash positions looking for an enhanced yield and are comfortable with conversion at the agreed rate.

2. Businesses looking for high returns that are targeting specific FX rates.