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Forex Trading Without Leverage, Margin, or Interest: Is it Allowed?

Answered as per Hanafi Fiqh by Muftionline.co.za

Q: I trade currencies in the forex market. I do not use leverage or margin. Neither do I get interest or pay any interest. All these things are done through an online broker. Is it permissible?

Bismillaah

A: The Shar’ee principle in regard to a business transactions is that in a situation where both exchanges are specific commodities (i.e. both have the potential of being مبيع), then in order for the transaction to be valid at least one exchange should be received at the time of the transaction (though the other item be deferred). However, if a specific commodity is being sold in exchange of an unspecific commodity (e.g. an item being sold in exchange of money) then in order for the transaction to be valid at least possession of the specific commodity should be taken.

In the case of online forex, since both exchanges are deferred, this transaction is invalid and impermissible in Islam.

And Allah Ta’ala (الله تعالى) knows best.

Answered by:

Mufti Zakaria Makada

Checked & Approved:

Mufti Ebrahim Salejee (Isipingo Beach)

This answer was collected from MuftiOnline.co.za, where the questions have been answered by Mufti Zakaria Makada (Hafizahullah), who is currently a senior lecturer in the science of Hadith and Fiqh at Madrasah Ta’leemuddeen, Isipingo Beach, South Africa.

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