The central bank has frequently sold dollars to defend its currency, but this marks the first intervention of over US$100 million since the military took control of the government last year. Such operations are capped at around US$50 million.

The announcement Wednesday came after the kyat depreciated by nearly 40% since the beginning of August. That day, the kyat traded at around 4,000 per dollar. On Thursday, following the release of the notice, the currency rallied to roughly 3,500 kyat per dollar.

The Central Bank of Myanmar has yet to disclose how it will supply dollars into the market.

The kyat started to depreciate sharply in mid-July, likely triggered by the enforcement around that time of a rule requiring residents and businesses to convert foreign currency into the kyat. The central bank issued that directive in April.

The forced conversion rule is believed to have prompted an increase in people withdrawing excess kyat from bank accounts to exchange for dollars through money changers.

Banks conduct foreign exchange of the kyat based on the central bank’s reference rate of 2,100 kyat per dollar. But that exchange rate is wildly divorced from the market value. The depreciation of the kyat has been driven by importers and other parties that need dollars.

“It appears transactions between bank accounts are done with the official rate, while the differences against the market rate are settled separately with cash,” said a source familiar with the situation on the ground.

Because of the weak kyat, the prices of imported gasoline and cooking oil are roughly triple the level prior to the government takeover in February 2021. Locally grown rice, which is normally not exposed to currency fluctuations, is now about 40% more expensive, due to the higher costs of fertilisers and transport.

Central bank authorities have become keen to manage foreign exchange rates. In late August, the Foreign Exchange Supervisory Committee issued a notice that online businesses engaging in “illegal” foreign currency trading on social media platforms will face “legal actions”, according to a report from a state-owned newspaper.