Shariah Compliant Investments Total Over $2.7 Trillion Dollars

Forex trading has become wildly popular worldwide and the Islamic world is no exception. It has been estimated that the amount of money invested in Shariah compliant investments totals over $2.7 trillion dollars. Shariah compliant simply means that the investments comply will religious law of Shariah law. Many investment funds that are Shariah compliant usually have Muslim clerics as paid consultants. Several investment houses use compensated Muslim clerics including such investment giants as Standard and Poors, Dow Jones, Deutsche Bank, Goldman Sachs and many others.

Shariah Compliant Financial Institutions

As can be seen the Shariah compliance finance market is huge and enables those of the Islamic faith to invest in a religiously and socially acceptable manner. Muslims living in non Muslim countries are allowed to use regular banks and financial institutions when there are no Shariah compliant alternatives available in that locale. Once a Shariah compliant financial institutions and banks are available the devout Muslim is obligated to use them.

Shariah Law and Forex Trading

There are several forex brokers and traders that specialize in investing according to Shariah law. Shariah compliant forex trading forbids the receiving and paying of interest or swaps while buying and selling on forex exchanges. According to The Accounting & Auditing Organization For Islamic Institutions; “SWAPS are not permitted in the forms in which they are practiced in commodity exchange”

Shariah Compliant Market Set For Huge Growth

Since Islamic Shariah law forbids the paying and receiving of interest Muslim forex traders will use Shariah compliant swap free trading platforms for their forex trading. It should be noted that these same trading platforms are open to anyone regardless of religious affiliation. These Shariah compliant accounts are not necessarily free from fees and commissions.
Because of the immense wealth in the Middle East and other Muslim countries Shariah law compliant forex brokers and traders have become big business in the world of forex. Shariah compliant brokers can easily be found online. As was stated before at present Shariah-compliant investments total over $2.7 trillion and this number is expected to grow by several times the present amount within a few short years if present trends continue.

Euro Could Hit $1.33 by Summer’s End

Andrew Wilkinson of Interactive Brokers Group is predicting that the euro could fall as low as $1.33 by the end of summer. Arguments in favor of the euro include the fact that the Euro Zone has been more temperate in addressing the recession than the US and the UK both of whom have injected billions into their economies in attempts to address the financial crunch and credit crisis. Many economists have been concerned that the injection of such massive sums would bring about inflation but last Friday’s US employment indicate that the economy is recovering and inflation is not a threat.

Downward Pressure on the Euro

Many Federal Reserve figures have argued that the slow rate of recovery block inflationary threats. As if validating the Fed’s position U.S. interest rate futures fell last week. The Euro Zone is widely seen as behind the curve in addressing the recession and many believe that this lack of action will put downward pressure on the euro.

Other factors affecting currency exchange rates include Tuesday’s auction of $37 billion in 3-year Treasury bonds. The auction was well received and investors snapped up the short term T bills. If past results are any indicator the auction of 7 and 10 years bonds will in all likelihood attract investors.

Weak Stocks Boost Yen

Weakening stock markets have put downward pressure on the euro which has fallen against the Japanese yen as safe haven demand increases. Many analysts see economic performance in the Euro Zone as weak. In an article published by Finnish newspaper Uutispaeivae, European Central Bank member Erkki Liikanen said that the economic recovery of the 16 nation Euro Zone would take some time. The US dollar is expected to hold recent gains and Richard Grace of Commonwealth Bank of Australia stated, “The case is building for an eventual turn higher of the dollar. The U.S. economy is improving and the economy will likely emerge from the global recession ahead of Europe.”

Markets Benefit From Recovery

Last week’s good news from the US raised investor confidence and provided many with new forex opportunities. In the US the unemployment rate fell for the first time in fifteen months and fewer jobs were lost than expected. Emerging markets are starting to benefit from the recovery. Nick Chamie of RBC Capital stated, “Emerging markets are hopefully going to benefit from a global recovery that gains a bit more traction in the second half of this year.”

Recovery Dollar Positive

Stocks rallied across the globe and the US dollar reached a seven week high against other major currencies. The British pound was pressured downward by the news that the Bank of England intends to engage in more quantitative easing. The Japanese yen fell against most major currencies as Japanese investors sought higher yielding assets overseas. US Treasuries posted their weekly increase since 2003 making them more attractive in this week’s upcoming auction. Ulrich Leuchtmann of Commerzbank AG stated, “The recovery is setting in relatively quickly. It’s positive for the dollar in the long term because when the economy recovers it’ll be clear that the U.S. is coming out of the crisis better.”

Dollar Returning to Fundamentals

Many investors are returning to the view that good economic news should benefit the dollar rather than pressure it downward as it has in the recent past. The dollar index rose 0.8% last week to 78.975 reducing safe haven demand for the greenback. Many forex experts see the dollar returning to fundamentals. Stephen Gallo of Schneider Foreign Exchange remarked, “This is monumental, This would mark a sea change in how speculators trade economic data and the overall view of the U.S.”

Full Calendar This Week

The coming week promises a full economic calendar. On Tuesday the Federal Reserve begins a two day meeting, on Wednesday June’s international trade data is scheduled for release, and Friday will see the release of July consumer prices, industrial production and consumer sentiment.

Commodity Based Currencies Big Winners

Better than expected data from investment banking giant Goldman Sachs and positive US retail sales data have prompted a slight rise in risk sentiment among forex traders and investors. Currency exchange rates have been affected with commodity based currencies like the Aussie, Canadian, and New Zealand dollars have been the big winners. After six straight weeks of declines the Canadian dollar rose 1.3% to C$1.1353 against the US dollar. The yen fluctuated against the US dollar and euro as investors bet that the Goldman Sachs data indicated that the financial industry is recovering.

Volatile Trading Expected

Investors by and large still remain somewhat cautious and some analysts expect volatile trading throughout this week. Meg Browne of Brown Brothers Harriman & Co. stated, “The market’s hesitant because we’ve got more results out there and Goldman was one of the stronger companies. Things are better. It doesn’t mean we’re out of the woods, but things are in a better state.” Goldman Sachs, JPMorgan Chase & Co. and IBM are some of the 30 odd companies in the Standard & Poor’s 500 Index due to release second quarter results this week.

New Zealand Economy Improving

The pound rose 0.3% to $1.6274 after the Royal Institution of Chartered Surveyors said home priced rose for the first time in twenty months. The New Zealand dollar rose 0.8% against the yen to 59.23 after a statement by New Zealand’s Reserve Bank Governor who said that the New Zealand economy is likely to recover quicker than the economies of New Zealand’s trading partners.

Geithner Committed to Strong Dollar and Deficit Reduction

Addressing investor concerns about huge US deficits Treasury Secretary Timothy Geithner said in Jeddah, Saudi Arabia, that the US government is committed to a strong dollar and that he is “very committed” to cutting the US deficit. Despite the economic optimism some experts counsel caution and see current data as not sufficient to support current optimism. They also predict volatile currency trading this week

Dollar’s Reserve Status Safe For Now

The G 8 summit this week is the focus of Forex traders and investors and those who follow currency movements. There has been speculation that China or Russia would force a discussion of the US dollar’s reserve currency status but according to a statement by an unnamed source the reserve status of the US dollar will probably not be mentioned in the final communiqué issued by the group. According to the anonymous source, “It is expected to be mentioned and discussed remotely.  But the discussions have not yet reached the level of putting it in writing in the communiqués.”

China Says Dollar is Still Important Reserve Currency

The G 8 summit will also include Brazil, India, China, Mexico and South Africa and Egypt. This summit dubbed the ‘G 14’ will meet on July 9th to discuss climate issues, trade and financial issues. China has asked for a discussion of proposals for a new global reserve currency or currencies. In a reassuring statement Chinese Vice Foreign Minister He Yafei told the press, “The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come. You may have heard comments, opinions from academic circles about the idea of establishing a super sovereign currency. This is all, I believe, now a discussion among academics. It is not the position of the Chinese government.”

Canada Says Dollar a Stabilizing Force

Canadian Finance Minister Jim Flaherty joined in the discussion saying that the US dollar has been a stabilizing force during the current global recession. Flaherty said he expects a general discussion of foreign exchange rates during the G8 summit but is unsure if the results of that discussion would be in the final communiqué. This weeks meeting will start with the G 8 nations meeting alone and later meetings will include representatives of emerging nations.