The Exchange Fund's total assets fell $10.5 billion to $176.7 billion in December, the Monetary Authority says. Foreign currency assets slipped $5.3 billion while Hong Kong dollar assets fell $5.2 billion.

The fall in foreign currency assets was due mainly to valuation losses on foreign currency investments and a decrease in securities purchased but settled in the following month. These decreases were partly offset by an increase in Certificates of Indebtedness, and interest and dividend income from foreign currency assets.

The decline in Hong Kong dollar assets was due mainly to a decrease in bank borrowings, which was partly offset by placements received from fiscal reserves and valuation of Hong Kong equities held by the Exchange Fund.

The currency board account shows the monetary base at the end of December was $298 billion, a rise of $6.2 billion, or 2.1%, from the end of November.

The rise was due mainly to increases in Certificates of Indebtedness and market value of Exchange Fund Bills and Notes outstanding. The former reflected the seasonal demand for banknotes around Christmas and New Year.

The backing assets grew $5.5 billion, or 1.7%, to $332.7 billion. The increase was attributable mainly to the issuance of Certificates of Indebtedness in the monetary base together with interest from investments, which were partly offset by revaluation losses.