(Recasts with central banker's comments)
BEIJING, Oct 26 (Reuters) - Diversification of China's $2.27 trillion stockpile of foreign exchange reserves is a long-standing policy that aims to avoid short-term volatility, a senior central banker said on Monday.
Earlier in the day, the dollar fell to a 14-month low after an opinion piece in a newspaper published by the People's Bank of China said it should increase the share of euro and yen in its reserves while maintaining the dollar as the principal currency.
Asked whether Beijing wanted to raise the portions of euro and yen in its portfolio, central bank vice-governor Yi Gang indicated the market might have over-reacted, at least on the day.
"The diversification of China's foreign exchange reserves in different currencies is our long-standing policy," he told Reuters.
"But this kind of diversification does not mean any short-term volatility. Because our reserves are huge, it will certainly be a stable process overall," said Yi, who is also head of the State Administration of Foreign Exchange, the agency which manages the vast majority of China's currency reserves.
The composition of the reserves is a state secret, but bankers estimate that at least two-thirds of the holdings are invested in dollar-denominated securities.
The dollar had already recouped some of its losses after Zhou Hai, the author of the newspaper report, told Reuters he was not speaking for the People's Bank of China.
"It is purely my personal view," Zhou, a researcher with the central bank's branch in Harbin, capital of the northeastern province of Heilongjiang.
Other researchers have expressed similar views to Zhou, whose piece appeared on the "Theoretics Weekly" page of the paper.
Senior Chinese officials have expressed concern about the weakness of the dollar but have also acknowledged that the U.S. currency will remain the linchpin of the global financial system for the foreseeable future.
Any diversification from the dollar is proceeding very gradually, foreign exchange strategists say, not least because Beijing has continued to buy dollars to prevent the yuan from rising since the middle of 2008.
"We will keep the yuan exchange rate basically stable," Yi said in a reiteration of official policy.
Zhou wrote in the Financial News that China should improve the yuan's exchange rate mechanism to reduce pressure on the central bank to buy inflows of foreign exchange.
China should exclude the Hong Kong dollar from its official reserves because Chinese can easily obtain the currency, and it is pegged to the U.S. dollar, Zhou added.
Before Monday's piece, Zhou's most recent article was in the August edition of China Finance, according to an Internet search. The article was titled, "A few thoughts on supporting modern agricultural development through finance -- the example of Heilongjiang." (Reporting by Aileen Wang, Zhou Xin, Alan Wheatley and Simon Rabinovitch; Editing by Victoria Main)