FOREX and its Application in Comparison with Islamic Jurisprudence Principal

This article consists of three main parts. The first part is a review about Foreign Exchange market (FOREX) where the history, function, transaction volume and participants of FOREX also its distinctions with other financial markets will be considered. Furthermore this part puts forward characteristic of transaction in FOREX as well as the economic effects of changes in currency rates on the economy condition. In the second part of this article the Islamic justification of FOREX with jurisprudence principles will be considered. Firstly the validity of FOREX transactions mechanisms and instruments according to sharia and Islamic jurisprudence will be analyzed in this section. Furthermore we consider different comments about it. Besides, this part takes into account the current instruments of FOREX such as futures, forwards, options, swaps and cash transactions. All of the transaction mechanism through different instruments are explained and considered by Islamic conditions of transaction validity. Finally this survey introduces some possible approaches for Islamic financial institutions to participate in this market. On the other hand some Islamic substitute solutions for hedging foreign exchange risk by Islamic financial institutions are introduced