Foreign Exchange (FX)

Value TODAY FX Contract

FX transaction done today for settlement of foreign currency on the same day.
Value TOM or SPOT FX Contract

FX transaction done today for settlement of foreign currency on next business day (TOM) or next two business days (SPOT).
Outright FX Forward Contract

FX transaction done today for settlement of foreign currency at a future date beyond 2 business days up to maximum 1 year. We also offer Long Term Foreign Exchange (LTFX) for settlement beyond 1 year and up to a maximum of 15 years.
FX Option Contract

FX transaction done today which gives you a right, but not an obligation to buy or sell a certain currency against another currency, at a predetermined (strike) price for settlement on a specific date in future. Normally a premium cost is payable up-front.
Customised FX Forward Contract

Structured FX forward transaction with zero premium cost option to provide a certain flexibility to better meet customer’s FX hedging need. Settlement date can be from 1 month up to 1 year.

Purpose

Impact of FX risk

Most companies are exposed to the day-to-day volatility of the FX rate (i.e. the FX risk). This volatility directly and indirectly affects the cash flow, revenue, expenses, and overall financial statement of companies.

If you do nothing

Only convert your foreign currency on the day of requirement, or within a day or two days of requirement. Unless your benchmark is the prevailing spot rate (see SPOT FX contract below), you will be exposed to daily FX volatility, which means you can be exposed to extreme movements in FX rates.

If you open a Foreign Currency Account (FCA / FCA-i)

To debit or credit a foreign currency account without converting to local currency as and when payments are due or receipts are receivable. This method is useful when your net exposure is negligible.

If you cover or hedge your FX risk

Typically a Forward FX contract is used to hedge your FX exposure. Types of Forward FX contract used include:

An Outright Forward FX contract,
An FX Option (or a Customised FX Forward) contract, and
Other derivatives.

All FX contracts are agreements (obligations by both parties) to exchange a specified amount of one currency for another currency, as determined by the Forward FX rate/s for settlement on a pre-determined future (or forward) date, according to the terms of each contract.

Terms & Conditions

The purpose of FX transactions should be in compliance with the Foreign Exchange Policy (FEP).

Other T&Cs apply.

Shariah Principles

FX transaction under Shariah Principle Bai’ al Sarf

A contract of exchange of the same or different currency for valued TODAY, TOM and SPOT.

The transaction involves two parties, seller and buyer entering into an offer and acceptance which can be expressed orally, in writing or by any other methods recognised by Shariah. Both parties shall determine and agree mutually on the currency and the rate at the time of the execution or termination of the contract. The exchange contract is binding in nature. Therefore, the contract shall not be terminated unilaterally by either of the contracting parties.

Once execution terms are agreed, both parties shall inform each other of the terms of delivery of the currencies. Upon completion of the Bai al Sarf, both parties cease to have any further obligation.

FX Forward transaction under Shariah Principle Bai’ al Sarf & Wa'ad

FX transaction under Bai’ al Sarf and Wa'ad done today for settlement of foreign currency at a future date beyond 2 business days up to a maximum of 15 years.

Islamic Foreign Exchange Option Equivalent

FX transaction under Bai' al-Sarf, Wa'ad and Commodity Murabahah/Bai' al-Innah that gives you a right, but not obligation to do currency exchange at a predetermined strike price on a specific future date. A premium equivalent payment is payable upfront.

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Foreign Exchange (FX)

Benefits & Privileges

Value TODAY FX Contract

Value TOM or SPOT FX Contract

Outright FX Forward Contract

FX Option Contract

Customised FX Forward Contract

Purpose

Terms & Conditions

Shariah Principles

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