Fatwa ID: 02965

Answered by:  Maulana Tahsin Alam

Question:

Assalamu Alaikum Wa Rahmatullah

Is Forex trading halal?

Answer:

بسم الله الرحمن الرحيم

In the name of Allah, the Most Gracious, the Most Merciful.

“Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world's currencies trade. The forex market is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion. All the world's combined stock markets don't even come close to this.”[1]

“If by Forex markets you mean the foreign exchange market, which allows banks and other institutions to buy and sell currencies, then the Islamic viewpoint is as follows:

It is stated in Hidayah that Bai-sarf is that transaction where both the buyer and seller are making a transaction using either gold or silver. In such transactions excess on either side is not permissible and it is also essential to complete the transaction before separating. (Vol 3. P104). Scholars’ state that paper currencies are not considered to represent gold and silver but rather a legal tender and is considered as fulus.In view of the above, currency trading will be permissible as the genus (jins) of both currencies is different. It is stated in Hidayah that when exchanging items of varied nature, it is permitted to have excess on one side. (Vol 3, P105)

However, for the transaction to be valid, it would be necessary that the transaction is either completed on a spot basis or at least one party takes possession of the currency at the time of the transaction. Separating with debt on both sides (deferred to a future date) is not permitted.” To read more, please visit- http://daruliftabirmingham.co.uk/forex-markets/

Only Allah SWT alone knows best.

Written by Maulana Tahsin Alam

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham