If you’ve found yourself with U.S. dollars in hand—perhaps from an overseas business transaction, a foreign investment return, a fortunate windfall, or simply some idle cash—you may now be wondering: where is the best place to park your USD if you choose to hold onto them?
But why hold USD in the first place?
As investors, we may often hold USD for several reasons. Firstly, the dollar provides liquidity and flexibility, allowing investors to quickly seize opportunities in U.S. markets without needing to convert currencies. Additionally, if you expect your local currency to depreciate, holding USD can help protect your wealth against this potential loss in value. Lastly, holding USD can diversify your portfolio, reducing the risk associated with holding assets in a single currency.
In the following sections, we’ll explore the various strategies available to Singaporean and Malaysian investors for managing their USD holdings, each with its own set of advantages and drawbacks.
1. U.S. Treasury Bills
T-bills are short-term government securities backed by the U.S. government, making them one of the safest investment options. It is an excellent option if you don’t mind locking up funds for a short period, and it is considered virtually risk-free. When it comes to how to buy the T-bills, it becomes a little bit tricky. If you somehow have a U.S. Tax Identification Number (TIN) or Social Security Number (SSN), you can directly go onto the U.S. government’s official website, TreasuryDirect, to buy U.S. T-Bills.
For most investors who don’t have a TIN or SSN, the alternative method is to purchase T-bills through a brokerage. Brokerages that offer access to U.S. securities, like Interactive Brokers, can facilitate these purchases. However, it’s important to note that Interactive Brokers charges a commission fee of 0.002% of the face value or $5, whichever is higher, for trades with a face value of less than US$1 million.
| Pros | Cons |
| Low default risk | Funds are locked up for a certain period |
| Can be sold on the secondary market | Selling before maturity can lead to losses if interest rates rise |
2. Foreign currency fixed deposits
This might be a good option if you don’t mind having your funds locked up for a certain period. Many banks in Singapore and Malaysia offer USD fixed deposits, making it a convenient choice for parking your dollars. In Malaysia, these deposits are insured by local deposit insurance schemes, specifically PIDM (Perbadanan Insurans Deposit Malaysia), up to MYR 250,000, which provides an additional layer of security. However, the situation is different in Singapore, where the SDIC (Singapore Deposit Insurance Corporation) does not cover foreign currency deposits; it only insures SGD-denominated deposits.
It’s also important to remember that if you withdraw your deposit prematurely, you may face penalties, such as receiving less or no interest. Below are some banks in Singapore and Malaysia that offer foreign currency fixed deposits:
| Country | Banks | Min Period | Min Amount | Interest Rate* |
| Singapore | DBS | 1 day | Overnight & weekly tenors: USD 50,000 Others: SGD 5,000 equivalent | 4.47% |
| UOB | 1 week | 1-2 weeks: USD 25,000 1-12 months: USD 5,000 | 4.43% | |
| OCBC | 1 month | USD 5,000 | 4.37% | |
| Malaysia | Maybank | 1 day | USD 3,000 | 4.65% |
| CIMB | 1 day | MYR 10,000 equivalent | 5.05% | |
| RHB | 1 week | USD 2,000 | 4.90% |
| Pros | Cons |
| Familiarity and ease of dealing with local banks | Funds are locked in for the duration of the deposit term |
| Fixed interest rates providing predictable returns | Generally lower interest compared to international options |
| Generally considered safe |
3. Foreign currency accounts
If you prefer not to have your funds locked up, many banks in Malaysia and Singapore offer foreign currency accounts that allow you to hold USD and other currencies. These accounts provide flexibility for those who regularly deal in multiple currencies or require access to their funds in USD.
For example, the RHB Multi-Currency Account allows you to hold up to 33 foreign currencies in just one account. The same applies to foreign currency fixed deposits; SDIC does not insure foreign currency accounts, but PIDM does.
Another popular option within this category is Wise (formerly TransferWise), which functions as a multi-currency account, allowing you to hold and transfer USD, among other currencies. Wise offers competitive exchange rates and lower transfer fees, making it a cost-effective choice alongside traditional bank foreign currency accounts.
| Pros | Cons |
| Convenience of managing USD alongside local currency accounts | May have account maintenance fees or minimum balance requirements |
| Easier to set up | Exchange rates for USD transactions might be less competitive |
4. Interactive Brokers
If you plan to invest the USD you have on hand, placing it directly in Interactive Brokers can be a convenient option. Interactive Brokers offers a platform where you can hold USD while earning interest on uninvested cash, with rates of up to 4.83%, depending on tiering. However, to qualify for these rates, you need to meet certain requirements, such as maintaining a minimum net asset value (NAV) of US$100,000 and holding a minimum amount of idle cash. If these conditions aren’t met, you’ll receive interest at rates proportional to the size of your NAV. This could be the ideal choice if you’re already an Interactive Brokers user and plan to make future investments through the platform.
| Currency | Tier | Rate Paid: IBKR Pro | Rate Paid: IBKR Lite |
| USD | ≤USD 10,000 | 0% | 0% |
| >USD 10,000 | 4.830% (BM*-0.5%) | 3.830% (BM*-1.5%) |
| Pros | Cons |
| Competitive interest rates on idle cash balances | No interest for the first USD 10,000 of cash and no NAV |
| Access to U.S. markets and USD-denominated assets | Interest earned only on cash in the securities segment, not in commodities |
Risk considerations
When parking USD as a foreigner, there are several risks you need to consider. Firstly, currency conversion risk can have a significant impact on your returns. For Singaporeans, although the SGD has historically been less volatile against the USD than the MYR, there’s still the risk of unfavourable exchange rates during conversion.
Malaysians, on the other hand, face greater volatility. While converting large sums to USD might hedge against MYR depreciation, it also comes with the risk of missing out on potential MYR appreciation. For example, during a recent bullish period for the MYR, you could have lost 6% over the past year if you were holding USD. Whether this trend is sustainable is uncertain, but historically, the MYR has experienced long-term depreciation against the USD.
Additionally, while the USD is often considered a safe-haven currency, it is not immune to geopolitical and economic risks. Global economic shifts or U.S.-specific economic challenges can affect the value and stability of your USD holdings, potentially impacting your overall returns.
It’s also important to consider the actions of the Federal Reserve when holding USD. If the Fed decides to cut interest rates, this could lead to a decrease in the interest you earn on USD-denominated assets and potentially weaken the USD’s value relative to other currencies.
The fifth perspective
Parking USD as a Singaporean or Malaysian investor presents both opportunities and risks. It’s important to consider the long-term performance of both the USD and your local currency: Do you have more confidence in the USD or in your local currency? Your decision should be guided by your investment timeline, risk tolerance, and your plans for the USD funds. Whether you opt for T-bills for safety, foreign currency accounts for flexibility, or Interactive Brokers for market access, it’s crucial to stay informed and regularly reassess your strategy to ensure it continues to align with your financial goals.
I thought that there would be US withholding tax payable on US Treasury Bills. Is that correct or not?
(I don’t like not getting anything on the part of my warchest that’s parked in my US broker’s sweep account at the moment)
Hey Jonathan, good question. It looks like there’s no withholding tax for foreigners for US T-bills.
https://www.bogleheads.org/forum/viewtopic.php?t=430908
another alternative. Local stock brokers like IFast, Phillips, etc, offers their investors the facity to sweep excess funds into interest-bearing money market instruments
Good one. Thanks for sharing!