Shariah advisor licensed by the central bank of bahrain

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ForexTraders, Currency options Explained, Available from:  

 

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OIC Islamic Fiqh Academy, “Resolution and Recommendations of the 

Council of the Islamic Fiqh Academy 1985-2000”, 2000, 

www.forextraders.com/forex-education/

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Retail Forex Trading: Views from the front lines of Islamic Finance

SHARIYAH REVIEW BUREAU

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a) Buy order (going long)

When purchasing USD/JPY, it is as if one borrows 

JPY and lends USD

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. The transaction goes through 

the following hypothetical phases:

1. One borrows JPY from an interbank, 

2. JPY is sold in lieu of USD

3. USD is lent to an interbank.

4. Interest payment is received

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b) Sell order (shorting)

When shorting USD/JPY, it is as if borrowing USD 

to buy JPY. When the trade is closed, JPY is sold 

and the borrowed USD is paid back with interest. 

1 One borrows USD from an interbank

2. JPY is bought with USD

3. JPY is lent to an interbank.

4. Interest payment is received 

5. JPY sold for USD

6. Interest paid for borrowed currency 

7.  Difference in opening and closing  

position settled

5. Spot Forex – two types with physical FX and speculation 

After reviewing several documents and discussing with a number of brokers and traders, we understand 

that spot forex can be traded in the following ways:

1. Speculative spot FX 

2. Physical FX