War talk sends euro near four-year high

in early European trade, its highest since January 2000.

"Last week's close above $1.0700 has forced us to adjust our view," said Nicole Elliott of Mizuho Corporate Bank.

"It suggests we have underestimated bullish momentum and the gathering anti-dollar feeling."

The fresh dollar weakness came as world stock markets tumbled and UN arms inspectors delivered an update on their work in Iraq to the Security Council.

Some market experts discounted the arms inspectors' report as a driver of the forex market.

Said Robert Sinche, currency strategist at Citibank: "Has Iraq proven that it has disarmed? No. Is there proof that it is holding weapons of mass destruction? No.

"So the forex market is saying there is no clear conclusion to support one view or the other, and it will continue to take direction from other markets."