(Adds further reaction)

BEIJING, Dec 22 (Reuters) - China's foreign exchange reserves, the world's largest stockpile, shrank in October to less than $1.89 trillion, their first monthly fall since December 2003, a source familiar with the situation said on Monday.

The reserves stood at $1.906 trillion at the end of September, the last date for which official figures have been reported, meaning they fell by at least $16 billion during October.

The source, who wished not to be identified, declined to say whether the reserves continued to fall in November. The only other month since the start of 2000 during which the reserves fell was Dec. 2003.

Cai Qiusheng, an official with the State Administration of Foreign Exchange (SAFE), acknowledged in a speech on Saturday that the reserves had fallen from their level above $1.9 trillion, but gave no further details on the extent or timing of the fall.

A moderate easing in the reserves' accumulation was what authorities had long been hoping for, Cai noted, according to a transcript of the remarks published on the web portal Sina.com.

Most economists were relatively sanguine about the fall in the reserves, which Beijing has long been hoping would start to flatten.

"It would do China no harm at all if FX reserves fell. China is extraordinarily well positioned in terms of import cover, in terms of its coverage of external debt," said Stephen Green with Standard Chartered in Shanghai.

More important was that the current account surplus start to come into better balance, Green said, to ease China's imbalances with the rest of the world.