Under What Circumstances would Spot Forex (foreign exchange) Trading Be Allowed?

In the name of Allah, The Beneficent, The Merciful

First Published: 28th May 2018 | Last Updated: 1st August 2018


This summary discusses whether it is acceptable to engage in spot Forex trading, and is an overview of a research paper which can be downloaded here.

Spot Forex trading refers to a contract for selling of one currency for another, for immediate payment and delivery on the spot date which typically tends to be within two days of the transaction itself. These types of contracts are typically entered into with the purpose on generating profits stemming from changes in value of the currencies concerned, as are to be viewed quite separately to ad-hoc currency purchase for the purpose of travel or trade (Bureau de Change).

With regards to forex trading, this paper is specifically addressing spot forex trades, as opposed to forward or futures market trades, which are deemed impermissible by default.

The paper concludes forex spot trading is not permissible, as it may involves a double deferment of both currencies which renders the trade impermissible.  Moreover the trader never has possession or ownership of the currency he is said to be selling, which is a key shariah requirement.