Can I purchase and sell currencies for making profit? For example, if I purchase some EUR/USD and later I sell this EUR/USD when it becomes profitable, will this be permissible? Will the profit be halal?
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
It is permissible to trade in currencies of different countries and to make profit from such trade. However, it is necessary that it is either a cash deal from both sides or that it is a cash deal from one side and a credit deal from the other side. If it is a credit deal from both sides, the transaction will not be permissible.
For example: A sells $100 to B for €50. This will be permissible if the transaction is carried out in one of the following three ways:
– both A and B exchange the $100 and €50 there and then
– A gives $100 there and then and B will give €50 sometime in the future
– B gives €50 there and then and A will give $100 sometime in the future
If, on the other hand, the transaction is conducted between A and B with the agreement that they will exchange the $100 and €50 sometime in the future, the transaction will not be permissible. The reason for the impermissibility of this transaction is that departing with debt on both sides is not permissible according to the hadith.
(Fatawa Usmani: 3/148, 149)
And Allah knows best.
Mufti Faizal Riza
13/9/2011