Short answer
Exchanging one currency for another is halal when it is done on the spot, as at a money changer. Most retail forex trading is not permitted in the mainstream view, because it relies on leverage from the broker, overnight swap interest, or contracts for difference with no real exchange. A swap-free "Islamic account" removes only part of the problem.
Currency exchange (sarf) is permitted at any agreed rate when it is immediate, with neither side deferred by agreement. Forward and futures currency contracts, interest on rollovers, and trading with a broker's loan that is tied to trading with that broker are not permitted.
The four schools agree on this.
Explanation
The Prophet ﷺ allowed different kinds of money and goods to be exchanged at whatever rate people agreed, provided the exchange was hand to hand. Modern scholars apply this to currencies: swapping dollars for dirhams at a bank or a money changer, or sending money home at today's rate, is halal.
Online retail forex is a different product. Common problems:
- Leverage. The broker lends you 50 or 100 times your deposit, and the loan only exists because you trade with them. A loan tied to a sale, from which the lender benefits, is forbidden by the hadith "a loan with a sale is not lawful."
- Swap or rollover charges. Interest charged or paid on positions held overnight.
- CFDs and spread bets. No currency changes hands; you only settle the difference in price.
- Delayed settlement and futures. Exchange that is postponed by agreement is not a spot exchange.
Many brokers offer swap-free "Islamic accounts." These remove the overnight interest but usually keep the leverage and the CFD structure, and some replace swaps with fees that work the same way. Treat the label with care.
Most retail forex traders lose their money, and short-term currency betting is close to gambling in spirit. If you exchange currency, do it for a real need, on the spot, with your own money. Contemporary scholars of all four schools apply the spot rule to currencies.
The evidence
Quran, Surah Al-Baqara 2:275
ٱلَّذِينَ يَأْكُلُونَ ٱلرِّبَوٰا۟ لَا يَقُومُونَ إِلَّا كَمَا يَقُومُ ٱلَّذِى يَتَخَبَّطُهُ ٱلشَّيْطَٰنُ مِنَ ٱلْمَسِّ ۚ ذَٰلِكَ بِأَنَّهُمْ قَالُوٓا۟ إِنَّمَا ٱلْبَيْعُ مِثْلُ ٱلرِّبَوٰا۟ ۗ وَأَحَلَّ ٱللَّهُ ٱلْبَيْعَ وَحَرَّمَ ٱلرِّبَوٰا۟ ۚ فَمَن جَآءَهُۥ مَوْعِظَةٌۭ مِّن رَّبِّهِۦ فَٱنتَهَىٰ فَلَهُۥ مَا سَلَفَ وَأَمْرُهُۥٓ إِلَى ٱللَّهِ ۖ وَمَنْ عَادَ فَأُو۟لَٰٓئِكَ أَصْحَٰبُ ٱلنَّارِ ۖ هُمْ فِيهَا خَٰلِدُونَ ﴿٢٧٥﴾
Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, "Trade is [just] like interest." But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to [dealing in interest or usury] - those are the companions of the Fire; they will abide eternally therein.
Exchange is lawful while interest on positions is not.
Quran, Surah Al-Maaida 5:90
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ إِنَّمَا ٱلْخَمْرُ وَٱلْمَيْسِرُ وَٱلْأَنصَابُ وَٱلْأَزْلَٰمُ رِجْسٌۭ مِّنْ عَمَلِ ٱلشَّيْطَٰنِ فَٱجْتَنِبُوهُ لَعَلَّكُمْ تُفْلِحُونَ ﴿٩٠﴾
O you who have believed, indeed, intoxicants, gambling, [sacrificing on] stone alters [to other than Allah], and divining arrows are but defilement from the work of Satan, so avoid it that you may be successful.
Leveraged currency betting resembles gambling.
Sahih Muslim 1587
Sahih... فإذا اختلفت هذه الأصناف فبيعوا كيف شئتم إذا كان يدا بيد ...
"If the kinds differ, sell as you wish, as long as it is hand to hand."
Different currencies may be exchanged at any rate on the spot.
Jami' at-Tirmidhi 1234
Graded hasan sahih... لا يحل سلف وبيع ولا شرطان في بيع ...
"A loan combined with a sale is not lawful, nor two conditions in one sale."
A broker's loan tied to trading with that broker falls under this ban.
Where the ruling is recorded
- al-Hidaya, Kitab al-Sarf. The rules of currency exchange and the requirement that it be immediate.
- AAOIFI Shari'ah Standards, Standard on trading in currencies. Permits spot exchange and forbids forwards, futures and margin trading.
- Buhuth fi Qadaya Fiqhiyya Mu'asira (Mufti Taqi Usmani), Paper on the rulings of paper money. How the rules of exchange apply to modern currencies.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.