Under shari’a, it is permissible to trade in foreign exchange provided that both countervalues (badalain, pl. of badal) are exchanged simultaneously, either through actual possession (qabdh fe’eli) or constructive possession (qabdh hukmi). This implies that currency exchange should take place on spot, i.e., at market rates prevailing at the time of trade, not at a future date. As a result, currency forward contracts and currency futures contracts are both impermissible from a shari’a perspective.
November 20, 2023