// By Simon Johnson
LONDON, March 4 -The dollar sank to new four-year lows against the euro on Wednesday as investors questioned the U.S.'s commitment to a strong currency, while fears of an imminent war in Iraq depressed equities and boosted safe haven assets.
Investor nerves were stretched by a U.S. move to ramp up its fighting capacity in the Middle East sending stocks down and pushing up the price of safe havens such as bonds, gold and oil.
U.S. Treasury Secretary John Snow said on Tuesday he was "not particularly concerned" about the decline in the dollar since the February 21-22 Group of Seven meeting, casting doubt on the U.S. authorities' commitment to a strong currency.
"It was Snow's comment that triggered the whole thing. His comments implied they were comfortable with the dollar falling," said Bilal Hafeez, foreign exchange strategist at Deutsche Bank.
"Later they came out with some Treasury aide saying they maintain a strong dollar policy but it seems like Snow is much like O'Neill in so far as...the market now views him as someone who's quite happy to see a weaker dollar."
The dollar fell through $1.10 for the first time since March 1999, as dealers said Snow seemed increasingly reminiscent of his predecessor, Paul O'Neill, who gained a reputation for confusing markets on dollar policy.
The dollar also hit three-year lows against an index of currencies =USD and four-year lows against Swiss franc CHF= .
It was also down half a percent against the Japanese yen at 117.23 JPY= and facing lows of more than six months below 116.80.
SEEKING A BOLT HOLE
Investors, seeing war with Iraq as ever more certain, shunned stocks looking for less risky investments.
U.S. stocks closed near five month lows as Iraq and domestic economic worries weighed, setting the tone for Europe,
The FTSE Eurotop 300 Index .FTEU3 was down around 0.8 percent as a series of corporate results failed to excite investors, after breaching last Wednesday's six-year closing low in early trade.
"General worries about a looming war in Iraq and about the impact its having on a weak economy, including consumer spending prospects, remain the driving force," said David Thwaites, a pan-European equities strategist at BNP Paribas.
As stocks slumped, gold and bonds -- generally considered as safe haven assets, rose.
Strong overnight price gains in U.S. Treasuries, where two-year yields broke below the 1.50 percent barrier for the first time, dragged European yields down and pushed the March Bund future to a record contract high.
Two year Schatz yields EU2YT=RR were down 1.5 basis points at 2.26 percent after matching record lows hit Friday, while 10-year Bund yields EU10YT=RR slid three basis points to 3.96 percent.
Gold prices, helped by the sickly dollar were higher. Spot gold XAU= was trading at 355.75/6.50 an ounce, up from New York's Tuesday close of 352.55/3.30.
Oil also climbed as investors eyed the U.S. military build-up and looked for data later in the day expected to show lower U.S. inventories. April Brent Crude LCOJ3 was up 69 cents at $33.78.