Unsterilized Foreign-Exchange Intervention
The buying or selling of domestic or foreign currency or assets by monetary authorities in order to influence exchange rates as well as its money supply.
Investopedia Commentary
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. The purchase of domestic currency is intended to cause an appreciation of the currency against other currencies. If, on the other hand, the central bank sells domestic currency by purchasing foreign assets, the money supply increases as domestic currency is being released into the market. In this case, the currency is expected to depreciate against other currencies.
Related Links
Formulating Monetary Policy
The Federal Reserve (the Fed) Tutorial
What Is Money?
What Are Central Banks?
See also: Appreciation, Central Bank, Depreciation, Exchange Rate, Federal Reserve Bank, Federal Reserve System, Monetary Policy, Money Supply, Sterilization
Also spelled: unsterilized intervention