UPDATE 1-China's April forex reserves fall most in 5-1/2 years amid slowdown worries

(Adds details, official comment)

BEIJING, May 7 - China’s foreign exchange reserves fell by $68 billion in April, the biggest drop in five and half years, official data showed on Saturday, as the dollar climbed while foreign investors dumped Chinese stocks amid worries about the slowing economy.

The country’s foreign exchange reserves - the world’s largest - fell to $3.12 trillion last month from $3.188 trillion in March, the biggest monthly drop since November 2016.

Analysts polled by Reuters had expected the reserves to fall to $3.133 trillion in April.

The State Administration of Foreign Exchange (SAFE) said in a statement that the 2% drop in April reserves from March mainly reflected valuation effect as the dollar gained against other major currencies, and changes of global asset prices.

“In April 2022, China’s cross-border funds generally continued the trend of net inflows, and the supply and demand in the domestic foreign exchange market remained basically balanced,” the SAFE said.

The yuan fell 4% against the dollar in April, while the dollar rose 5% in April against a basket of other major currencies.

Overseas investors extended their selling of Chinese shares into April on mounting worries about the impact of prolonged COVID-19 lockdowns and the fallout of the Ukraine-Russia war.

China’s foreign exchange reserves dropped $130 billion in the first four months, the official data showed. They had climbed $33.6 billion in 2021.

China held 62.64 million fine troy ounces of gold at the end of April, unchanged a month earlier. The value of China’s gold reserves fell to $119.73 billion at the end of April from $121.66 billion at the end of March.

Reporting by Brenda Goh and Kevin Yao; Editing by Michael Perry and William Mallard