Seoul, Jun 4 (IANS): South Korea's foreign reserves contracted to $310.87 billion last month due to a sharp fall in conversion value of non-dollar denominated assets that offset a rise in investment return, the central bank said Monday.

Foreign reserves reached $310.87 billion as of the end of May, down $5.97 billion from a month earlier, according to the Bank of Korea (BOK).

The May figure was down from the record high of $316.84 billion tallied in April, but it stayed above the $300 billion mark, the psychologically-important level to protect the local financial market from the possible foreign capital exodus amid the potential financial crisis, reported Xinhua.

The BOK attributed the May contraction to a drop in conversion value of non-dollar denominated assets such as the British pound and the European single currency that depreciated amid growing uncertainties surrounding Europe's debt crisis. The drop in value offset an increase in investment profits, said the bank.

As of the end of April, South Korea was the world's seventh-largest holder of foreign reserves following China, Japan, Russia, Taiwan, Brazil and Switzerland.