YANGON - Myanmar's central bank set a reference exchange rate of 818 kyat per dollar(S$ 158) on Monday, the first business day under a managed float currency regime that is the most dramatic economic reform yet by a one-year-old civilian government.
For 35 years, the kyat was pegged to the International Monetary Fund's special drawing rights at 6.4 kyat per dollar. But a parallel market has existed, with a recent rate in a range of 800 to 820 kyat. The parallel rate has been used for most everyday transactions.
The Central Bank of Myanmar (CBM) gave the new rate on its website, along with indicative cross rates for other currencies. (http: www.cbm.gov.mm/images/stories/pdf/mpd/2.4.2012.pdf)
"The reference exchange rate of the kyat for account transactions against the U.S. dollar is based on the auctions conducted by the Central Bank of Myanmar and authorised domestic dealer banks," it said.
The CBM, which has given little information on the new system, held trial auctions with local banks in March and met bankers at the end of last week to finalise procedures, bankers said.
A senior banker with knowledge of the discussions said participating banks could put in up to six different bids and would be committed to its rates if they were accepted by the CBM.
Authorities would allow banks to buy and sell the currency in a trading band of 0.8 per cent either side of the reference rate, the senior banker said. A 2 per cent band had been planned but that was changed after a meeting last week, the source said.
CBM Deputy Governor Maung Maung Win told Reuters last week that 11 private and three state-run banks would participate initially and another eight private banks might be included later.
Auctions are initially planned for each business day but Maung Maung Win said they might not be needed every day once the system was up and running, without elaborating.
There are no international banks operational in the former Burma, although some, particularly Asian names, have representative offices.
Economic reforms and the expected easing of Western sanctions are expected to stimulate more international currency flows and encourage foreign banks to set up shop in the country.