* Euro's share of world foreign exchange reserves falling
* Asia reduces participation in euro zone syndicated sales
* ECB bond buying masks exodus, concerns remain for long term
* Graphic: international currency reserves http://reut.rs/2pgjamN
LONDON, May 5 (Reuters) - Asian central banks are buying fewer euro zone government bonds, leading to concern among investors that price swings may become more dramatic in a market still recovering from a series of debt crises.
Banks who sell bonds for euro zone governments say that if emerging market central banks, hitherto big buyers of such safe-haven debt, stay away, other investors may also be put off.
"Some of the Asian central banks like China and some of the southeast Asian countries have been among the top 10 buyers in syndicated deals in the past - but this year they have been keeping away from the market," said one primary dealer for many of the largest euro zone countries. This view was echoed by three of his counterparts at other banks.
"If not for the ECB, this could have resulted in a real sell-off, and the borrowers could have been forced to pay more of a premium," the first banker added, referring to the European Central Bank's bond-buying stimulus scheme.
Data on central bank appetite for euro zone sovereign and government agency debt suggests both have been falling for several years, with the drop recently accelerating.
Major investors in the market are watching this trend closely.
"Central bank participation and how that is evolving is key," said Richard Casey, head of government bonds for Pioneer Investments, which has 228 billion euros of assets under management.
"If some central banks and non-resident investors are not buying now, what valuations will be enough to entice them back in? That's the question we are asking ourselves for the medium term," he said.
Official statistics show Asian investors - who bankers say are predominantly central banks - have this year bought up to just 2 percent of syndicated bond sales by France, Belgium, Italy, Austria and Finland.
That marks a significant fall from last year, when they bought 14.35 percent of a Belgian 10-year bond syndicated sale, 13 percent of a French 20-year deal and even 3.4 percent of an Italian 50-year bond sale.
In syndicated bond sales, banks sell bonds to investors on the borrower's behalf.
Analysts say central banks' lower participation partly reflects an overall fall in central bank currency reserves over a number of years but also deeper concerns over the single currency, most recently fueled by the rise of anti-euro candidates in several European elections.
Japanese investors, notably, sold a record 1.58 trillion yen of French government bonds in February on concerns that anti-euro, far-right leader Marine Le Pen could win the French presidential election.
The fall in demand for euro zone bonds comes as the euro has fallen in popularity as a reserve currency around the world.
IMF data on worldwide foreign exchange reserves shows a steady decline in the euro's share from 28 percent in 2009 to 19.7 percent at the end of last year. Over the same period the dollar's share has risen.
Distribution data from German state-owned development bank KfW and the European Investment Bank, which sell large volumes of both dollar and euro bonds, also suggests Asian central banks are shifting away from the single currency.
For example, Asian investors bought 11 percent of a 5 billion euro sale of KfW 10-year bond sale in February, but later the same month they bought 30 percent of a $4 billion four-year KfW bond sale, according to data from International Financing Review, a Thomson Reuters company.
"If people are worried about how sustainable the euro is, not just over the next three or five years but in the long term, you probably want to reduce your allocation," said Deutsche Bank rates strategist Abhishek Singhania.
(Editing by Hugh Lawson)