* China diversification report hits dollar
* World shares flat
* Wall Street set for small gain at start
* Euro zone bonds hit one-month low
* Oil projected lower next year
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 26 (Reuters) - A Chinese report saying Beijing should increase its holdings of euros and yen in its foreign reserves knocked the already battered dollar on Monday while global stocks struggled to overcome last week's weakness.
Wall Street looked set for small gains at the open.
Euro zone government bonds hit a one-month low.
The dollar fell to a 14-month low against the euro and the yen got a boost from an opinion piece in the Financial News, a paper published by the People's Bank of China.
It said the dollar should remain the principal currency in China's foreign exchange reserves but that the share of euros and yen should increase. [ID:nPEK285229]
The issue of countries diversifying their reserves or even ditching the dollar has been one of the factors weakening the U.S. currency this year.
This was underlined by the general weakness that continued even after the author of the report said he was expressing a personal opinion.
The dollar has lost more than 7 percent against a basket of major currencies so far this year <.DXY>.
"We have thin markets and markets are grabbing whatever they can hold on to ... people are just looking for more excuses to buy euro/dollar," said UBS currency strategist in London Geoffrey Yu.
The euro
The dollar was down 0.1 percent at 91.95 yen
On oil markets, crude was falling towards $80 a barrel. A Reuters poll projected an average price of $74 a barrel, a rise for the sixth consecutive month.[ID:nLN373543]
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For a graphic showing the Reuters oil price poll, click here: http://graphics.thomsonreuters.com/109/CMD_OILPL1009.gif
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STOCKS FLAT
World equities as measured by MSCI <.MIWD00000PUS> were flat and there were small gains on the main emerging market index <.MSCIEF> after some weakness last week.
There were some signs last week that investors may be becoming more jittery about taking on risk than they have been lately, or at least keener to book profits.
Emerging market stocks, for example, fell for four days in a row.
On Monday, European shares were flat. Analysts said some investors were holding back for the U.S. GDP figures due later this week to get some idea of direction.
Earlier, Japan's Nikkei average <.N225> hit its highest close in four weeks.
Euro zone government bonds edged lower, tracking U.S. Treasuries down as that market braced for a record wave of issuance this week.
December Bund futures
The U.S. government will offer a record $123 billion in longer-dated debt this week, beating the previous record of $115 billion set in July. (Additional reporting by Jessica Mortimer; graphic by Scott Barber; editing by Stephen Nisbet) (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Hub click on http://blogs.reuters.com/hedgehub)