Sterilized interventions are transactions that are offset by central bank transactions which nullify any impact on domestic money creation while unsterilized interventions are included as part of a deliberate monetary policy. Intervention is prompted by the view that if a country can keep its exchange rate relatively steady there is likely to be a greater likelihood of capital inflows.
In order to support its exchange rate, a country must, however, have a healthy level of foreign exchange reserves so as to position itself to support the rate where it deems it necessary for the achievement of macroeconomic stability.