June 22 (Reuters) - Nearly all central bank reserve managers surveyed by UBS expect a more multipolar world in the coming years and almost half expect currency reserves to reflect that, though they are also cooling towards China's yuan, the bank said on Thursday.
Of the roughly 40 central banks surveyed, 48% expect central bank currency diversification over the next five years to create a more multipolar setup that centres around the U.S. dollar, the euro and the yuan, UBS said in its annual reserve management seminar survey.
The euro was seen as the most likely to benefit from geopolitical and macroeconomic shifts over the next five years, though it was also the currency respondents most frequently mentioned reducing over the last year.
The U.S. dollar's average share of holdings dropped to 56% from 63% last year, but it was still seen as the second leading beneficiary of geopolitical and macroeconomic shifts, in a sign that the dollar's position remains secure.
Even as they expect it to play a key role in a multipolar currency reserve system, central banks are starting to cool towards the yuan.
The survey found that 72% of respondents are invested or consider investing in the currency, down from 85% last year, and that 47% think confrontation with the U.S. has slowed its internationalization.
Indeed, the survey showed managers' average 10-year target allocation for the yuan as a percentage of total reserves fell to 5.2% from 5.8% in the previous year.
Central banks are also planning to add further positions in the Japanese yen, as well as commodity currencies like the Canadian, Australian and New Zealand dollars, the survey said.
"The U.S. dollar's gentle decline as the main store of wealth for the world's major reserve managers continues with the decades-long shift towards a multipolar currency world edging ever so gently forward," said Max Castelli, head of strategy and advice, sovereign institutions at UBS Asset Management.
"This is no move away from the dollar, but more a slow diversification into other currencies." (Reporting by Yoruk Bahceli; Editing by Conor Humphries)
