DUBAI, Aug 15 (Reuters) - Yemen's central bank has floated the country's currency, instructing banks to use the market rate for the riyal instead of a fixed rate, according to a circular issued on Monday.
The circular said that the decision was taken at a meeting on Saturday, ditching the 250 riyal rate to the U.S. dollar currently in use.
It told commercial and Islamic banks to "use the exchange rate prevalent in the market for the U.S. dollar and other foreign currencies in accordance with the exchange rate lists issued by the central bank", adding that a floating rate will be adopted as of Aug. 15.
The currency is changing hands at around 350 riyals to the dollar in the black market, according to traders.
The central bank in April last year devalued the exchange rate to 250 riyals to the dollar from 215 riyals.
The currencies of most oil-exporting Arab countries are pegged or closely tied to the U.S. dollar, but Yemen has been torn by a two and-a-half year civil war between the internationally-recognized government of President Abd-Rabbu Mansour Hadi, backed by Saudi Arabia, and the Iran-aligned Houthis.
The central bank has kept the country from financial collapse and the population from running out of food during the war.
Hadi's government last year moved the central bank from the capital Sanaa to the southern port city of Aden, where the government is currently based, in a move that economists feared could hasten the country's collapse.
Both the central bank in Aden and the one in Sanaa suffer from depleted reserves but play a key role in mitigating widespread famine and disease by paying some public sector salaries.
Last week, the central bank in Aden complained to its allies in the Saudi-led military coalition about a lack of cash deliveries needed to pay salaries.
(Writing by Sami Aboudi; Editing by Kim Coghill) ((Sami.Aboudi@thomsonreuters.com; +97143918301;))