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Tuesday, February 16, 2010

Trading in Foreign Currencies

Q: 1) Is it permissable for me to buy foreign currency at lower than the market rate in this way, that the seller gives me the pounds, we agree on a rate then I give him the money later?
2) How is the market rate calculated? Will the spot rate be considered (what we hear on radio or see on currency converting sites), or will the rate given by the bureau be considered (including their commission or excluding)?
3) Is it permissable for me to charge a commission when exchanging currency like all other bureaus do?

A: Currencies that are in vogue today will fall under the category of trade commodities. Therefore, the price charged for these currencies is left to the mutual agreement of the two parties, regardless of what is being charged on the foreign-exchange markets. Whatever the two parties agree upon, that price becomes binding. However if both parties decide that we will not fix our own price but will instead consider the market price then you are faced with the question of which market price to consider. Well in our humble opinion one has to consider the price of the currency as given in the local media (radio, newspapers, etc.)

It will not be permissible to charge a commission. Rather increase the price of the currency but without commission of any sort.

And Allah Ta’aala knows best

Mufti Siraj Desai