Is FOREX trading permissible?

Question

I want to know about FOREX trading. In FOREX trading, currencies are traded over the counter with exchange rates varying in response to market forces. Currencies are always traded in pairs, one against the other. For example, the highest volume pair in the Euro/U.S. Dollar, which has the ISO (International Organization of Standardization) code EUR/USD. When the exchange rate is quoted, it looks something like EUR/USD = 1.3116. This means that it takes $1.3116 to buy one Euro. This is not money on money like interest or gambling. This is similar to the stock market, but on a far larger scale and has an equal number of loss or gain probability.

Muftī Asif Umar · Accepted Answer

In the Name of Allāh, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh

In the case of buying and selling different currencies, it is permissible to add on a fixed percentage to the market rate on condition that it is mutually agreed upon by both parties and as long as possession of one of the two currencies is taken.

However, if payment from one side is deferred, then the transaction will only be valid with the current market rate (at the time of agreement). In this case any excess amount or percentage added will be considered interest.

(Fatawa Hindiyyah, 3/224, Rashidiyyah)

(Contemporary Fatawa, P. 141, Idara Islamiat)

And Allāh knows best.

Muftī Asif Umar

Washington, DC (USA)

Concurred by:

Muftī Abrar Mirza

Chicago, IL (USA)

Under the Supervision of Muftī Ebrahim Desai (South Africa)

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