The dollar fell versus the Japanese yen on Wednesday as a weaker-than-expected reading on new orders for U.S. durable goods added to fears about the U.S. economic outlook.
Demand for the dollar also fell against the euro as investors awaited for more supportive news for the euro, which rose above $1.30 but has been stuck in a range recently.
The Federal Reserve is due to release its report on regional economic conditions, known as the Beige Book, later in the session. But analysts said the Fed is likely to report softer economic conditions, which may add to investors' risk aversion.
The euro rose 0.1 percent to $1.3007.
Markets seemed comfortable with euro/dollar around 1.30, but investors were still wary of opening up new long euro positions that would take it much higher, said BNY Mellon's Michael Woolfolk.
We came a long way this year, from $1.40 to below $1.20 in the euro, and a lot of that was based on the fear factor. So the retracement has been merely people taking out a lot of those short positions, he added.
Woolfolk said it will take a change in risk sentiment to start a new trend in the pair.
In late morning trading in New York, the dollar was 0.4 percent lower at 87.48 yen. It touched a session low at 87.44 yen as a report showed new orders for long-lasting U.S. manufactured goods unexpectedly fell for a second straight month in June, posting their biggest decline since August.
A string of lackluster economic reports recently has weighed on the greenback. And on Friday, the government's first reading on U.S. second quarter GDP is likely to show growth in slowed in the period amid a cooling in consumer spending and a wider trade deficit.
The U.S. data now is the main focus in the forex markets, and it continues to come on the disappointing side, said Amelia Bourdeau, a currency strategist at UBS AG in Stamford, Connecticut.
Investors are lacking conviction and trading in major currency pairs will be limited to narrow ranges, she added.
We are past the good news from Europe on the stress tests and earnings, which helped the euro, and I'm not sure if even the U.S. GDP report on Friday will be able to break that pattern, Bourdeau said.
Still, this will mark four straight quarters of growth as the economy digs out of its longest and deepest recession since the 1930s.
The economy continues to run below its long-run growth potential, said Axel Merk, president and chief investment officer at Merk Investments in Palo Alto, California. It may be hazardous to investors' wealth to think this path won't be hazardous to the U.S. dollar.
The euro touched an 11-week high against the dollar at $1.3045 on Tuesday, helped by strong bank earnings and gains in European equities, following last week's favorable results of regulatory stress tests.
Traders said an option barrier at $1.3050 would need to be taken out for a move toward Fibonacci resistance at $1.3125, which is a 38.2 percent retracement of the December-June move.
Large option expiries were reported by traders at $1.3000 and $1.2850, potentially slowing the euro's gains on the day.
Elsewhere, the Australian dollar slid 1 percent to $0.8918, having dropped from a 11-week high of $0.9069 the previous day.
Australian consumer prices rose much less than expected last quarter, and core inflation slowed to its lowest in more than three years.
(Additional reporting by Steven C. Johnson in New York and Neal Armstrong in London; Editing by Kenneth Barry)