The Exchange Fund's total assets fell $8.2 billion to $1.103 trillion in May, the Monetary Authority says. Both foreign currency assets and Hong Kong dollar assets fell by $5.2 billion and $3 billion.

The fall in foreign currency assets was due mainly to valuations of foreign currency investments and redemptions of Certificates of Indebtedness, which were partly offset by interest and dividend income from foreign currency assets.

The decrease in Hong Kong dollar assets was due mainly to fiscal drawdowns and valuation of Hong Kong equities held by the Exchange Fund, which were partly offset by an increase in Exchange Fund Bills and Notes issued but not yet settled.

The Currency Board Account shows the Monetary Base at the end of May 2006 was $287.5 billion, a decrease of $1.2 billion, or 0.4%, from the end of April. The fall was due mainly to a decrease in Certificates of Indebtedness.

The Backing Assets fell by $600 million, or 0.2%, to $321.5 billion. The decrease was attributable mainly to the redemption of Certificates of Indebtedness in the Monetary Base together with the valuation of investments, which were partly offset by interest from investments.

Reflecting this, the backing ratio grew from 111.55% at the end of April to 111.81% at the end of May.