By Saqib Iqbal Ahmed
NEW YORK (Reuters) - The U.S. dollar's share of currency reserves reported to the International Monetary Fund fell in the fourth quarter, down for the third straight quarter, while the euro's share of reserves grew to the largest in four years, data released on Friday showed.
Reserves held in U.S. dollars fell to $6.62 trillion, or 61.69 percent of allocated reserves, in the fourth quarter, from $6.63 trillion, or 61.94 percent, in the third quarter.
Total allocated reserves increased to $10.73 trillion in the third quarter from $10.71 trillion in the previous quarter.
Global reserves are assets of central banks held in different currencies, primarily used to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.
While the dollar share of foreign exchange reserves contracted, the euro, the yen and the Chinese yuan's share all increased.
The U.S. dollar remains the world's dominant reserve currency but central banks around the globe appeared to continue to diversify their reserves away from the greenback.
"In terms of official flows, central banks' building up reserves, there has been a move toward diversification and that has primarily been led by greater usage of other currencies in international payments," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
"The renminbi is moving up the rankings. If you look at SWIFT payments data you can see it is increasingly used as a payments currency. The euro, of course, continues to stabilize after the euro crisis," he said.
The euro's share of global allocated currency reserves rose to 20.69 percent in the fourth quarter of 2018 to the largest since the fourth quarter of 2014.
The share of allocated currency reserves held in yuan, also known as renminbi, rose to 1.89 percent, the highest since the IMF began reporting its share of central bank holdings in the fourth quarter of 2016.
The Chinese currency rose 0.1 percent on a spot basis against the dollar in third quarter even as Washington and Beijing continued to spar on trade-related issues.
The yen's share of reserves rose to 5.20 percent in the fourth quarter to the largest since the second quarter of 2002.
Sterling's share of global allocated FX reserves fell to 4.43 percent in the fourth quarter to the smallest since the second quarter of 2017, the data showed.
The British currency, which has been plagued by volatility in recent months amid uncertainty around the Brexit process, fell 2 percent during the fourth quarter of 2018.