Unsterilized Foreign Exchange Intervention

DEFINITION of 'Unsterilized Foreign Exchange Intervention'

An attempt by a country's monetary authorities to influence exchange rates and its money supply by not buying or selling domestic or foreign currencies or assets. This is a passive approach to exchange rate fluctuations, and allows for fluctuations in the monetary base.

BREAKING DOWN 'Unsterilized Foreign Exchange Intervention'

If the central bank purchases domestic currency by selling foreign assets, the money supply will shrink because it has removed domestic currency from the market; this is an example of a sterilized policy. An unsterilized policy allows for the foreign-exchange markets to function without manipulation of the supply of the domestic currency; therefore, the monetary base is allowed to change.

RELATED TERMS
  1. Monetary Policy

    Monetary policy is the actions of a central bank, currency board ...
  2. Sterilization

    A form of monetary action in which a central bank seeks to limit ...
  3. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  4. Sterilized Intervention

    The purchase or sale of foreign currency by a central bank to ...
  5. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  6. Foreign Exchange Intervention

    A monetary policy tool in which a central bank takes an active ...
Related Articles
  1. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  2. Economics

    The Federal Reserve

    Few organizations can move the market like the Federal Reserve. As an investor, it's important to understand exactly what the Fed does and how it influences the economy.
  3. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  4. Economics

    What Is Money?

    It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created?
  5. Economics

    How To Prepare For Rising Interest Rates

    Ignoring interest rates is a mistake because there are many ways to increase your income as they start to rise. The key is to be ready to act.
  6. Economics

    How Interest Rate Cuts Affect Consumers

    Stock traders usually rejoice when the Federal Reserve cuts interest rates. But it’s not always best for everyone.
  7. Economics

    Understanding Conflict Theory

    Karl Marx advanced conflict theory, which claims society is in a state of perpetual conflict due to the competition for limited resources.
  8. Investing News

    Negative Interest Rates and QE: 3 Economic Risks

    Along with quantitative easing (QE), unconventional monetary tools are meant to stimulate economic activity, growth, and a moderate level of inflation.
  9. Economics

    How Negative Interest Rates Work

    Policymakers in Europe go for the unconventional: negative interest. What could happen?
  10. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is comparative advantage?

    Comparative advantage is an economic law that demonstrates the ways in which protectionism (mercantilism, at the time it ... Read Full Answer >>
  3. How does the Wall Street Journal prime rate forecast work?

    The prime rate forecast is also known as the consensus prime rate, or the average prime rate defined by the Wall Street Journal ... Read Full Answer >>
  4. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  5. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  6. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center