At a Glance

Tailored to your choice of currency pairs, strike rate and tenor

Potentially earn higher returns on the principal amount invested

Choose your investment tenors ranging from 1 week to 6 months

 

What are CLIs?

CLIs are dual-currency investments involving a currency option. The option gives the CLI issuer the right to repay the principal and interest at maturity, in either the base currency or alternate currency.

CLIs are often used by investors to improve returns on cash holdings, when they have a stable or mildly bullish view of a particular currency pair. Investors are looking for a higher return on their base currency deposits, instead of buying a particular alternate currency outright.

If they had a strongly bullish view of the alternate currency, they might prefer to buy that currency outright at the prevailing market price.

CLIs are sophisticated investment products that carry significant risks and are not suitable for investors who do not comprehend the product or are risk averse.

 

How do CLIs Work?

Investors agree with their bankers on the:


Illustrative example of a CLI:

Base USD100,000
Alternate currency AUD
Current AUD/USD exchange rate 0.9067
Strike rate 0.8917
Tenor 1 month
Enhanced yield 6.5% p.a.



Potential use cases of CLIs include:

  1. Your child will pursue further studies in Australia. You do not mind acquiring AUD periodically as savings to eliminate the risk that AUD might appreciate significantly against SGD by the time your child is ready to leave for Australia. You can either buy the AUD outright at the prevailing market rate (the spot rate) or invest in a CLI for either an enhanced yield on your SGD, or convert your SGD to AUD at the agreed strike level.
  2. You have USD in your account, and you believe AUD/USD will trade within a narrow range. You may invest in an AUD/USD CLI for potentially an enhanced yield if AUD/USD does not hit or fall below the strike level.
 

Benefits of CLIs



 

Investors may earn an enhanced return if their view of exchange rate movements are accurate.



 

Can be tailored to suit investors’ needs, based on their of currency pairs, the strike rate, and tenor.



 

A CLI’s tenor is generally short term, ranging from 1 week to 6 months.



 

In deciding the currency pairs, investors can choose from a variety of currencies, including AUD, CAD, CHF, EUR, JPY, NZD, SGD, and USD.

 

Risks of CLIs



 

Investors face the risk of having their base currency converted to the alternate currency at a rate lower than the market at maturity.



 

CLIs are meant to be held to maturity. Early withdrawal may result in investors receiving less than their principal amount.



 

CLIs are issued by financial institutions and investors are exposed to the issuer’s credit risk.

To understand the product-related terms, visit our Glossary.

Disclaimer for Investment Products

 

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