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. Investopedia Says:
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:
Appreciation
Central Bank
Depreciation
Exchange Rate
Federal Reserve Bank
Federal Reserve System
Monetary Policy
Money Supply
Sterilization
Sterilized Intervention |