By Saqib Iqbal Ahmed
Dec 31 (Reuters) - The dollar's share of currency reserves reported to the International Monetary Fund rose in the third quarter to its highest level in a year, while the yen's share of reserves grew to the largest in two decades, IMF data showed.
Reserves held in dollars totaled $6.75 trillion, or 61.78% of allocated reserves, in the third quarter, compared with $6.78 trillion, or 61.49%, in the second quarter.
This was the greenback's largest share of overall reserves since the third quarter of 2018 when it was 61.93%.
Total allocated reserves fell to $11.66 trillion in the third quarter from $11.74 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.
The dollar remains the world's dominant reserve currency but central banks around the globe have in recent years made a push to diversify their reserves away from the U.S. currency.
"I do think that the dollar will continue to very gradually cede some of its power and central banks will continue to diversify away from it, but the greenback will remain the predominate currency for settling international trade so it will continue to represent the bulk of reserves for the long term," said John Doyle, vice president for dealing and trading at Tempus Inc in Washington.
While the dollar share of foreign exchange reserves increased, the euro's share fell to 20.07%, its smallest share since the third quarter of 2017.
The yen's share of global allocated FX reserves rose to 5.60% in the third quarter to largest share since 2000, data showed.
The share of allocated currency reserves held in yuan, the Chinese currency also known as renminbi, rose to 2.01% percent, the highest since the IMF began reporting its share of central bank holdings in the fourth quarter of 2016.
(Reporting by Saqib Iqbal Ahmed; Editing by Catherine Evans and Alex Richardson)
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