Sterilization Definition

Sterilization Definition. Sterilization, or Sterilized Intervention, is a process by which a central bank may influence the value of its domestic currency relative to another foreign currency. The method typically involves two separate actions, one designed to offset the impact of the other, but in combination, to produce a desired result. It is generally performed to correct adverse changes of its currency in the forex market. If a domestic currency strengthens too much related to a trading partner, the central bank may intervene and buy the foreign currency and sell the domestic currency or issue government debt. To strengthen the currency, the opposite tactic is followed. Either process is used to manipulate the forex rate prevailing in the market.