The Real Presentation FOREX

8/3/2019 The Real Presentation FOREX

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1. JAM MASHANIS BT JAMIRAN 2010757431

2. NORASYIKIN BT MOHD LAZIM 2010595103

3. NUR HAFIZAH BT HUSSIN 2010763431

4. SUHAIDA BT MD BASAR 2010528891

Group: ABM2304B

Lecturer: EN. MUHAMMAD YUSRI BIN YUSOF @ SALLEH

THE MEMBERS:


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ISB 540

MODERN FOREIGN EXCHANGE :

PRACTICALITY AND SHARIAHPERSPECTIVES


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Definition of Modern

FOREX*What is FOREX?

The simultaneous buying of one currency and selling ofanother.

*What is FOREX market?

Conversion of one currency into another currency.

*Primary purpose of FOREX:

To assist international trade and investment, byallowing businesses to convert one currency to anothercurrency.


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History of

FOREX*The foreign exchange market (FX or FOREX)as we know it today originated in 1973.

*The Babylonians are the first use of paperbillsand receipts.

*However, Middle Eastern money changerswere the first currency traders who exchanged

coins from one culture to another.

*During the middle ages, the need for anotherform of currency besides coins emerged asthe method of choice.


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Cont

*These paper bills represented:

Transferable third-party payments of funds.

Making foreign currency exchange trading much

easier for merchants and traders.

Causing these regional economies to expand.

*From the beginning stages of FOREX during the Middle

Ages to World War I (WWI), the FOREX markets wererelatively stable and without much speculative activity.

*After WWI, the FOREX markets became very inconsistentand speculative activity increased tenfold.


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Timeline


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Practicality

FOREX Rates(Malaysia)


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Currency Exchange

CalculationEg:

Mid market rates: 2011-10-11 02:03 UTC

1.00 USD = 3.11151 MYR

US Dollar Malaysian

Ringgit

1 USD = 3.11151 MYR

1 MYR = 0.321388 USD

(Currency Converted Widget, 2011)


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FOREX Currency

Transaction*Operations:

24 hours a day

FOREX market is highly liquidTrading conducted electronically @ phone

*Bank, insurance companies and other large financialinstitution are using FOREX to manage the risk

associated with fluctuation in currency rates.

*Commodity Futures Trading Commission (CFTC) cause

vary of fraudulent websites such as Colfax TradingInternational and TradeForex4You.


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Tools of FX

Hedging

* FX Forward

* FX Swap

* FX Option


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Institution Involve in

FOREX

*Federal Governments and Central Banks

*Financial Institutions and Other Banks

*Moving On Hedgers

*Currency Speculators


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*Play major role in currency exchange:

Making extravagant moves along the FOREX market

hand in hand.

Government representatives meet up with CentralBanks representatives regularly to discuss the money

issues.

After all, these FOREX players are able to manipulateFOREX market in order to meet any kind of economicagenda.


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*What is interbank market?

The market where banks make transactions with oneanother and fix the currency price that FOREX traders seeon their trading platform.

*The transactions these large banks engage in are basedupon

credit relationship.

*Basically, it is safe to say that Banks are like dealers. Currencyexchange were done solely in banks or currency exchange pointsand all of them would have their own special currency rates.


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*A successful businesses with internationaltransactions:

Buy from or sell their product or services to an

international clientDirectly brings us to FOREX market.

*The problem every international business faces is the ambiguityin currency rates.

*Hedging strategies allow you to secure an exchange rate at thetime of the business deal. This eliminated the risk of dealing withforeign currency.


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*What is currency speculation?

Assumption of the risk of loss, in in return for the

uncertain possibility of a reward.

*Speculators take advantage of unpredictable exchange rates.

*The biggest speculators of them all are hedge funds. Hedge funds

use all kind of FOREX strategies to gather large returns just likebetting.


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Shariah Overview

*The basic exchange contract:

Currency exchange on a forwardbasis is

not permissible, that is, when the rights andobligations of both parties relate to a futuredate.

Permissible: On the spot basis.


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The Issue of Riba

Prohibition

*FOREX transaction is not permissible in Islamic Shariah due to the existof Riba.

*Types of Riba:

Riba al-fadl(excess/interest)

Riba al-nasiah(deferred)

-Riba is prohibited by disallowing deferredsettlement.

Riba al-jahiliyya(maturity date)

- Interest will be charge when maturity date is end.


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Al-Hadith

*Holy Prophet (peace be upon him) said,

"Sell gold for gold, silver for silver, wheat

for wheat, barley for barley, date for date,salt for salt, in same quantities on the

spot; and when the commodities aredifferent, sell as it suits you, but on the

spot."


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Cont

Conventional views:

Used to manage/hedge againstrisk of fluctuations in exchange

rates Is a derivative instrumentconducting a sale in the future ata price fixed today

Contract sealed today butsettlement & delivery in the future

Shariah Views:

Problem with FX: parties wish toexchange currency in future but

have already fixed a rate today Contravenes Shariah rules ofbay al-sarf: exchange shouldinvolve transactions on a spotbasis

Differences:

Documents

The Real Presentation FOREX