when central banks implement unsterilized foreign exchange intervention they do not put insulation measures in place therefore the transaction is one sided only purchasing or selling currencies or assets without being offset the policy allows foreign exchange markets to function without manipulating the supply of the domestic currency this means that a country s monetary base is allowed to change 
for example the federal reserve may decide to strengthen the japanese yen by buying japanese government bonds increasing its own reserves of the foreign country s assets the intervention is unsterilized if the fed decides not to sell its own bonds in reserves on the open market unsterilized vs sterilized foreign exchange interventionsas noted above central bank authorities use sterilized and nonsterilized methods of foreign exchange intervention when and if they want to influence exchange rates and or the money supply if the central bank purchases domestic currency by selling foreign assets the money supply shrinks because it has removed domestic currency from the market this is an example of a sterilized policy if a currency s value starts to weaken in the global market that country s central bank can step in and try to influence the exchange rate by creating demand for the currency the bank can buy its own currency by using foreign currency that it has in its own reserves this not only cuts off the currency s depreciation but also controls the money supply by reducing the amount in circulation the same is true if the central bank decides to do the opposite by selling its own currency if it appreciates too much 