Is it allowed to earn money through Forex trading?
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Question: Is it allowed to earn money through Forex trading? (Foreign exchange market or currency market). I asked our local imams about it, but received different answers. Liliya.

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Answer:

Assalamu Alaikum Wa Rahmatullahi Wa Barakaatuh

According to our research, Forex Trading is not allowed. Forex is basically trading over the internet without physical possession and delivery of currency. The Shari'ah has placed certain restrictions on currency trading so that Muslims can be safeguarded from Ribaa or interest and manipulation.

One condition is that at least one of the two currencies being traded in has to be taken possession of in a physical sense. This does not happen in Forex trade. In fact, from one angle it appears that this type of trading is more ‘virtual’, ‘imaginary’, and ‘figurative’ for one sells dollars in exchange for yen, for example, but the trader neither owns the dollars nor the yen. Any profit earned in such a deal will be equivalent to interest or riba. This is obviously not allowed in Shari'ah.

As far as physically trading in foreign currencies is concerned, the ruling is as follows:

If the currencies are of the same country, they cannot be sold at a rate different from their face value. However, if the currencies are of different countries, they can be sold on spot at whatever rate agreed upon between the parties which can be different from the market rate. However, if the payment is deferred on either side, the price must be fixed in accordance to the market rate. (Adapted from Ahkamul Awraaq an-Naqdiyyah, By Mufti Muhammed Taqi al-Uthmani)

And Allah Knows Best.

Wassalaam.

Mufti Suhail Tarmahomed

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