Nov. 8 (Bloomberg) -- The dollar will keep its status as the ``world currency'' for 15 to 20 years, said Stephen Roach, chairman of Morgan Stanley Asia Ltd., after Chinese officials signaled plans to diversify from the slumping U.S. currency.

``The yen, the euro, the sterling, the Swiss franc will take on greater roles but these still don't come close to commanding the kind of security that the U.S. dollar does in investors' minds,'' Roach, former global chief economist at Morgan Stanley, the second-biggest U.S. securities firm, said in an interview in Beijing. ``It will take 15 to 20 years'' before its status erodes.

The U.S. dollar has fallen against all 16 of the most- actively traded currencies this year, reaching record lows against the euro and Canadian dollar yesterday as Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves. The dollar is ``losing its status as the world currency,'' Xu Jian, a central bank vice director, told a conference in Beijing yesterday.

The dollar, trading at $1.4652 per euro at 8:01 a.m. in London, fell as low as $1.4731 yesterday on concern the Federal Reserve will cut interest rates for a third time this year to stop a housing slump from slowing the economy.

Global Reserves

The dollar's share of global currency reserves fell to 64.8 percent in the second quarter, down from 66.1 percent in the same period a year earlier, International Monetary Fund statistics show. The euro's share increased to an all-time high of 25.6 percent from 24.8 percent a year earlier. The pound's share is at 4.7 percent and the yen's at 2.8 percent.

``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, said yesterday.

The Chinese officials' comments echo those of Former Fed Chairman Alan Greenspan who on Oct. 1 said the dollar's dominance as a reserve currency is being eroded as the euro and the pound become more attractive to investors.

``It's very evident that the dollar is gradually losing part of its hegemony and the euro is coming up,'' Greenspan said.

The dollar this year has fallen 9.8 percent against the euro and 6.7 percent against the pound, yesterday reaching $2.1072 against the U.K. currency, the weakest since 1981.

Treasury Sales

Chinese investors reduced holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to the end of August as the government set up an agency in September to seek higher returns on currency reserves.

China, Japan and Taiwan sold Treasuries at the fastest pace in at least five years in August as losses linked to U.S. subprime mortgages sparked a slump in the dollar. Still, overseas investors own more than half of the $4.4 trillion in marketable U.S. government debt outstanding, up from a third in 2001, according to data compiled by the Treasury Department.

``Dollar-denominated assets held around the world are well in excess of America's share'' of world gross domestic product, Roach said. ``The dollar's status is very much intact.''

Roach said investors had not lost confidence in the dollar but were ``dumping'' it on concerns over the U.S. current- account deficit, which reached a record $197.1 billion in the first quarter before narrowing to $190.8 billion in the second.

``There's no way the yuan can even approach the dollar's status as the world currency,'' Roach said. ``People aren't losing confidence in the dollar as the world currency.''

A 25-year Morgan Stanley veteran, Roach has repeatedly said in past years that the U.S. economy will stagnate. He wrote in June that he ``failed to appreciate'' the impact of improved productivity.

To contact the reporters on this story: Josephine Lau in Beijing at jlau22@bloomberg.net; David McIntyre in Sydney at dmcintyre2@bloomberg.net

Last Updated: November 8, 2007 03:39 EST