* Euro hits 4-yr low vs dollar; Merkel says euro in danger
* German bans naked short-selling of some assets
* Euro support seen at $1.2133, then $1.2000
* Dollar index at 14-mth high as investors shun risk
By Jessica Mortimer
LONDON, May 19 (Reuters) - The euro fell to a four-year low against the dollar on Wednesday after Germany banned naked short-selling of some securities, while comments by the German chancellor further undermined confidence in the currency.
Germany announced late on Tuesday a ban on some high-risk bets involving euro-denominated government bonds, credit default swaps based on those bonds, and shares in Germany's 10 top financial institutions.
Analysts said that if investors could not respond to the euro zone debt crisis by selling bonds or equities, the euro was the only option for betting against European assets. This added to the already shaky sentiment towards the currency.
Chancellor Angela Merkel said the euro was "in danger", sparking concerns that Germany was panicking about the steep fall in the single currency.
"If Merkel (makes) comments in the wake of short selling, Germans are really frightened of the situation," said Jeremy Stretch, currency strategist at Rabobank.
The ban triggered a fresh wave of risk aversion on anxiety about whether more regulation could follow, and prompted concerns about a lack of solidarity among European countries in tackling the euro zone debt crisis.
At 0817 GMT, the euro was down 0.1 percent at $1.2177. In early Asian trade, it slid as low as $1.2143 on trading platform EBS, its lowest since April 2006.
Traders said option barriers at $1.22 were taken out and more were lined up at $1.21, $1.20 and right down to $1.15.
They said the euro's next support was at $1.2133, a 50 percent retracement from its all-time low of $0.8225 hit in October 2000 to its record peak of $1.6040 reached on EBS in July 2008.
WIDER BAN?
A fresh wave of risk aversion lifted the U.S. dollar to a 14-month high of 87.458 against a basket of currencies while the euro also fell to a record low versus the Swiss franc.
Traders said Germany's move limits risks players can take in euro assets, encouraging investors to shift funds elsewhere. A wider ban would only spur the outflow of money from the euro zone, putting further pressure on the single currency.
Investors are now waiting to see whether other countries will follow Germany as a wider ban could squeeze liquidity in euro zone markets. The Financial Times reported that Austria's finance ministry was pushing for a Europe-wide ban of naked short-selling of some financial stocks and debt securities.
The euro has fallen about 15 percent against the dollar so far this year, hammered by concerns Europe's debt problems and austerity measures to combat it could hamper the euro zone's economic recovery.
"The reaction in the euro is due to all the uncertainty that this brings - there have been fiscal problems, liquidity problems and now there is regulation on top of that," said Niels Christensen, currency strategist at Nordea in Copenhagen.
The euro fell to a record low against the Swiss franc below 1.4000 francs before steadying just above that level, which traders said was seen as the Swiss National Bank's new intervention threshold.
Data showed Swiss currency reserves soared in April, evidence of just how much the SNB has had to do to prevent a sharp franc appreciation versus the troubled single currency.
(Additional reporting by Rika Otsuka in Tokyo)