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How do the Central Banks intervene in the FX market to keep exchange rates fixed? What...

How do the Central Banks intervene in the FX market to keep exchange rates fixed? What issterilization?

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The central banks intervene in the FX . market to keep exchange rates fixed by acting as a buyer and seller of currency of last resort.

It would satisfy the Excess demand by supplying additional pounds to Fx market.

Until Equilibrium exchange rate is automatically maintained at fixed level.

Sterilization is a form of action in which a central bank has the power to limit the effects of inflow and ouflow of capital.

This process involves open market operation by the central bank.

Their main aim is to neutralize the impact of foreign Exchange operations.

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