YANGON - Military-ruled Myanmar has unexpectedly announced that it will release a new 5,000 kyat note, state media said Friday, raising concerns for the country's beleaguered economy.

The new note, worth less than five dollars, will be the largest banknote that the country has and is set to begin circulating on October 1, the New Light of Myanmar newspaper said.

"The Central Bank of Myanmar will put into circulation a new denomination of five thousand kyats currency note with effect from October 1, 2009," the paper quoted a bank statement as saying.

"All legal tender currency notes and coins will continue to be in circulation."

There was no explanation for the decision to bring in the new note, which is red with a white elephant on one side, according to a picture in the government mouthpiece daily.

Currency is a sensitive topic in Myanmar. Mass student-led pro-democracy rallies in 1988 were triggered when the regime invalidated currency notes the previous year in a bid to clamp down on the black market.

The move crippled the lives of ordinary people who depended on the illicit market because of soaring inflation. The military brutally suppressed the protests, leading to the deaths of more than 3,000 people.

Myanmar's gold and foreign exchange markets were unstable on Friday after the announcement, traders said, with many people wanting to exchange their current low-denomination notes amid fears that they could become worthless.

"I'm worried about inflation. I do not want to keep money in hand", a 45-year-old Yangon resident said.

"I would like to buy gold or US dollars but I can't buy them this morning as the dealers said they have nothing to sell. They have opened the market for sellers but not for buyers," the resident added.

Black market dealers said they were keeping hold of their US dollars.

"We do not know the government's intention by issuing the new bank note," one dealer said.