attempt to address macroeconomic problems, countries occasionally intervene in the foreign exchange market to change the value of their currency. Suppose the Fed (the Central Bank of the U.S.) decides to exchange euros for U.S. dollars in the FX market. It simultaneously sellsTreasury securities to the markets. In an This is an example of nonsterilized intervention, since the quantity of U.S. dollar in the economy will likely be unchanged as a result of these two transactions. Th euro reserves held by the Fed will decrease and the quantity supplied of dollar in the market will remain the same at the end of the two transactions. The U.S. dollar will appreciate and as a result U.S. inflation rate will increase. The U.S. dollar and the euro will both depreciate as a result of these two transactions The U.S. dollar will appreciate and the dollar supply to the market will be lower as a result of the two transaction