The lender wants to lend 1,000 shekels to his friend, the borrower. The lender will give the borrower a check in shekels. Can the borrower pay him back in cash shekels? Can they make an arrangement to have the loan linked to the dollar rate of the shekel?
A check loan may be payed back in cash.
A shekel loan payed in shekalim linked to the dollar is a matter of dispute whether it poses a problem of Ribbis. A heter iska should be used.
See Igros Moshe Y:D 3:37, Shu”t Shevet Halevi 3:119, Kovetz Bais Halevi 14 pg 152 who rule leniently.
cf. Chut Shani Ribbis pg 79 who is stringent, this was also the opinion of Harav Bentzion Abba Shaul.