March 31 (Bloomberg) -- The dollar's share of global foreign exchange reserves stayed close to a record low in the fourth quarter after the currency extended its two-year slide against the euro.

The dollar accounted for 63.9 percent of the total reserves held by governments and central banks at the end of 2007 compared with 63.8 percent at the end of the third quarter, the International Monetary Fund said today in Washington. The euro's share rose to 26.5 percent from 26.4 percent. IMF quarterly figures go back to 1999, the year the euro was introduced.

Diversification away from the dollar may have resumed in the first quarter as the threat of a U.S. recession sparked a 9 percent slide against the euro, its biggest quarterly loss since 2004. The dollar fell as low as $1.5903 on March 17, prompting European Central Bank President Jean-Claude Trichet to say he's ``concerned'' about recent foreign exchange shifts.

``The dollar is beginning to gradually lose its role as the unique currency of the global financing system,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp. ``Our expectation is the dollar will keep falling this year.''

Traders are selling the dollar as they bet the Federal Reserve will cut interest rates faster than the ECB to shore up an economy close to recession. The ECB has left its benchmark rate at a six-year high of 4 percent since credit markets seized up in August, while the Fed has slashed its main rate by 3 percentage points to 2.25 percent.

Total Reserves

The dollar fell 0.3 percent to $1.5836 per euro at 10:10 a.m. in New York, within a cent of its record low, after a European Union report showed consumer prices accelerated at the fastest pace in almost 16 years this month.

Total foreign-exchange reserves rose in the fourth quarter to $6.39 trillion from $6.04 trillion at the end of September. The figures on currency allocations are based on a smaller total, $4.06 trillion last quarter, because not all central banks agree to identify the breakdown of their reserves.

The British pound's share of foreign exchange reserves held at 4.7 percent. The yen's fourth-quarter allocation rose to 2.9 percent from 2.7 percent.

The dollar's share has declined from 71.1 percent in March 1999, while the euro's allocation has climbed from 18.1 percent.

The dollar is worrying policy makers in Europe and Japan ahead of next week's meeting in Washington of officials from the Group of Seven industrial nations. Trichet and Japanese Finance Minister Fukushiro Nukaga both said March 26 they are concerned about ``excessive'' currency moves, which are threatening exports just as the U.S. economy slows.

Such worries have prompted economists to begin suggesting the G-7 nations may consider intervening to buy dollars for the first time in 13 years. ``We're on intervention watch,'' said Woolfolk.

To contact the reporters on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net.

Last Updated: March 31, 2008 11:01 EDT