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.

  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 ...
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