What is the ruling on trading in currency and exchange?

The questioner : ... There is ... in reality ... a merchant who buys goods from abroad. Paper currency is subject to rising and falling. So, as a precaution, he is buying goods that are due in two months. Now, he is assessing the situation; he sees that a certain currency is rising or may rise in the future due to circumstances. So he buys it now, hoping that when he pays, he will have benefited. The opposite may happen, or it may not. This is a recurring issue because his demand is throughout the year. So from this angle, he buys the currency. When he feels the currency is about to fall, he sells it. So it is as if he is trading in currency, not for the purpose of money changers, but for the purpose of supporting his trade.

The Shaykh : In any case, what is the purpose of the money changers, Professor? It is trade.

The questioner : Only in currency.

The Shaykh : I understand, but the fruit is in the trade. Here, only the form has changed, while the fruit and the goal are the same. Especially since you mentioned that he buys in order to settle the payment after two months. The dispensation for this currency in which he wants to settle the payment is that he rushed and bought it. Is it permissible? He may suffer the opposite, and this is the problem with trading in currency exchange.

The questioner : Are they the same?

The Shaykh : Yes, they are the same.

Another questioner : Does that mean it is not permissible?

The Shaykh : By Allah, it is not permissible to trade in currency. It needs a solution to the problem.

The questioner : ...

The Shaykh : Necessities, may Allah reward you, have a very narrow meaning. For example, if a person is sick and if he does not eat something forbidden, then this is not like the one who wants to expand his trade and commits a forbidden act.

The questioner : My intention is ...

The Shaykh : It is never permissible. It is gambling, Professor. And you see the reality. The reality fully supports understanding the Sharia ruling. Yes.

The questioner : There is another form. Let us suppose that I sold goods in advance (salam) and I want to import them for the buyer. Their value today in foreign currency is ten thousand. To ensure that the price remains the same, for example, I calculated that when I sold it, the price of the British pound today is half a dinar. So I went and bought the currency and kept it with me, so that when the payment becomes due after so many months, I will have neither lost nor gained, since I calculated based on the value of the currency today. This is not trading, even though I bought it in advance. It is permissible that when I pay, it may have risen or fallen, or whatever happened. It is not the same thing.

The Shaykh : It is completely different from the forms we were discussing. I do not see anything wrong with this; on the contrary, this is a precaution to avoid falling into a problem that violates the Sharia. Please proceed.

The questioner : Shaykh, if you please, I understood that paper currency does not have intrinsic value, but it has a nominal value. And your eminence conditioned this nominal value, determining it by the state concerned. But this is not what happens. What happens is that this paper currency is either backed by gold reserves or a basket of currencies, or whatever determines the real value of the currency is not the state concerned. For example, in many cases, the value of a certain country's currency is determined by other countries as a result of the balance of payments and trade exchange between one state and another. It is determined by the value of the national output, or it is the sum of the goods and resources produced in that state. A state suddenly discovers oil, and wealth appears that did not exist before. It raises its currency without its own opinion. So, what determines the real value of this paper currency, which is a symbol for existing reserves, whether wealth or gold, plus the commercial transactions between one country and another, is no longer determined solely by a decree issued by the state, or by the desire of the state concerned. It may be the exact opposite. In other states, they conspire to make a certain state's currency value rise and the value of its paper rise, in order to reduce its exports to other states, as is happening now in Japan and America. They always try to make ... Japan is concerned that the dollar be high so that people do not import from America, so they find it expensive and buy from Japan. America announces that it will lower it to do the opposite. So it is not always the state that determines or controls the valuation of its paper currency.

The Shaykh : No problem, I am going with you on this. But I am not with you in your first statement, and even if you only said it at the end, the issue is not just this. So that means, this is possible and this is also observed. I do not know where this generalization came from in your first statement, that the state, especially America, to strike other states, raises and lowers according to its interest.

The questioner : Let us go to the benefits.

The Shaykh : This is it, but since this is the only reason, I am not saying it is the only reason. But in any case, the matter falls under the topic of gambling. The matter is not regulated. Why did our Lord forbid gambling and maysir? It is because it is not based on natural cosmic causes that, if a person adheres to them, like permissible trade, he will mostly succeed, even if he sometimes loses, there is no harm. So this is exactly like gambling. Therefore, I say that a person cannot live in a country that has a relationship with another country without being forced to convert currency. But the intention is not to make that a trade, because here it is said to be under the ruling of necessities. Otherwise, he would lose his money and lose his entire trade if he does not want to do the necessary exchange. In short, the form that Abu Muhammad brought up earlier.
Abu Muhammad: I want to speak about this. I did not see a difference between the form that Zuhair brought up and the one that Tahir brought up. Zuhair said, I want to import goods from a country abroad. I know now that the value of the pound I want to import with is low, and I am afraid that in two months, when the goods arrive and I want to pay, the value of the pound will rise. So I buy my need of pounds to import those goods now, and I convert it, thereby ensuring that I buy it at the current price. Just as Tahir said, I agree with Zuhair. I sell him these goods for ten thousand dinars. Now the price corresponds to ten thousand. So if I buy the pounds now and reserve them and bring my goods, I did not see a difference.

The Shaykh : There is no difference in the form, but the difference is in the intention.

The questioner : The intention here is that this price is ten thousand now.

The Shaykh : Its value differs without increase or decrease here, right? Or not? While here there is a big difference.

The questioner : That he wants to import at the lowest possible cost.

The Shaykh : That is it.

Another questioner : The difference is greater here ...

The Shaykh : The form is different. I am talking about the intention. I agreed with him that this form is exactly this form, but the intention is vastly different between this and that. So now you will say, now the form is one. Did I contradict? Did I contradict something? I did not contradict.

The questioner : I will only go to a third form.

The Shaykh : I will bring the fifth and the thirty-third. Professor, no problem, the forms and appearances multiply, multiplying to the point where they cannot be counted. But deeds are judged by their endings. Now, the last thing I spoke about with Abu Yahya is that there is no person living in a country who is not forced to have currency from a country come to him to be exchanged in the countries where he lives. Did we not discuss this form? If so, what was our answer regarding this form?

The questioner : Necessities permit the prohibited?

The Shaykh : This is it, but the form, in terms of form, is the same. If we want to look, we should not look only at the forms, but also the motive for committing this form and that. In terms of appearances, they are all forms, but the intentions differ. So between, for example, one who has Iraqi currency, what does he want to do with it? He is forced to exchange it here because he lives in a country whose currency is the dinar, and vice versa.