The dollar fell against the yen and euro after disappointing durable goods data and a cautionary report from the Federal Reserve.

The economic outlook was further clouded by data showing orders for durable goods fell 1% in June after a revised 0.8% dip in May. Analysts had expected a 1% gain.

The dollar index, which measures the US currency against a basket of six others, fell to 82.139 from 82.200. The euro briefly breached $1.30 before retreating $1.2985.

Increased risk aversion pushed up demand for the yen on Wednesday. The greenback fell to 87.35 yen from 87.82 yen the previous session.

Meanwhile the Fed's Beige Book didn't provide any surprises. It showed slower growth in July, confirming that the economic recovery had lost some momentum.

The Australian dollar fell againt the US dollar after second quarter consumer price data came in weaker than expected, reducing expectations for another interest rate rise.

Sterling was little changed against the dollar at $1.5586 as Bank of England governor Mervyn King warned of a possible stagflation scenario of high inflation and low growth.

"The wider economic problems around the world underline the fact that we cannot be confident that the recovery in demand, output and employment here in the UK will be sustained," he said.

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